lloyd's register group review 2012

Group Review 2012

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.

We advance public education in transportation and other engineering and technological disciplines through research, training and related activities.

Our mission

Global R&DOur new Group technology centres in Southampton and Singapore will serve as the cornerstones of our global research and development network that will help to provide society and industry with advanced technologies, systems and solutions (see pages 23 and 39).

WEST Engineering ServicesHouston-based WEST Engineering Services joined the Group in April, securing our position as the premier independent risk management organisation supporting the global offshore drilling industry (see page 35).

390 linear metresWe now house the historically important IMarEST collection, more than 390 linear metres of publications, assuring its preservation for the future (see page 54).

56%A further significant reduction in our lost time incident frequency rate during the year means we have achieved a 56% reduction over three years.

LLOyD’S REGISTER In 2011/12

£893mDespite the tough global economic conditions, Group income at £893 million showed encouraging growth on 2011.

3.4%The underlying income increased by £28.8 million, or 3.4% on a constant exchange rate basis, excluding acquisitions.

£113,000The annual income per employee has stayed steady at £113,000 per annum.

June 2012: Safety certificates issued for Chinese signalling technology

Lloyd’s Register awarded three new safety certificates for a series of signalling products developed by the China Academy of Railway Science and Guangzhou Metro.

September 2011: Major contract with Maersk Oil

We won a contract to provide Maersk Oil with a comprehensive suite of risk management services to support the offshore operator’s commitment to meet global demand for energy in an efficient, safe and environmentally responsible manner. We will support Maersk Oil’s global management of four key areas of operational risk – hazard identification and risk assessment, accident and incident investigation, management of change, and contractor management.

December 2011: The world’s first newbuild LnG-fuelled tanker, MT Argonon

Delivered in Rotterdam to Lloyd’s Register class, heralding the start of a new era of cleaner shipping for Europe’s local waterways.

March 2012: LRQA certifies Soitec to quality, safety and environment management systems standards

Soitec (Euronext) is a world leader in generating and manufacturing revolutionary semiconductor materials for the electronics and energy industries.

new Group structureFrom July 2012, Lloyd’s Register Group Limited is 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 (see page 12).

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7,885Employees worldwide*

237Cities and towns with Group offices*

4Business divisions

3Regions

Who we are What we do How we do it

Where we are

*As at 30 June 2012

Our experts apply technical judgement and experience to ensure that relevant standards are met and that risks are recognised. They understand our clients’ businesses and the challenges they face so we can offer a service tailored to our clients’ needs. And the priority we place on research and development means we can lead and work on the latest innovations. Read more on page 6

We provide independent assurance and expert advice to companies operating high-risk, capital-intensive assets in the energy and transportation sectors. We help our clients to ensure the quality construction and operation of critical infrastructure – ships, oil platforms, power plants, trains. Through our business assurance services we help companies manage their systems and risks across a wide range of sectors. Read more on page 4

Lloyd’s Register is unique. At its heart, a charity with a mission to protect life and property and to advance transport and engineering education and research. And funding this is our operating arm, a successful, profit-making business which relies on the skills, knowledge and experience of our employees – professionals and experts in their fields. Read more on page 2

We provide reliabilitythrough simplicity

As we complicate in the name of progress, destabilising factors can multiply. Our job is simple: help our clients and their communities reach the levels of reliability they need.

We provide professional services across the life cycle of assets that are of critical importance to our lives. We help our clients to build, operate and extend the life of ships, oil rigs, rail networks, power stations – with safety as the key.

Contents

02 Who are we04 What do we do06 How do we do it08 Where we do it10 Chairman’s review13 Chief Executive’s review16 Global issues18 Marine26 Transportation32 Energy40 Management Systems46 Around the world50 Chief Financial Officer’s report52 Board of Directors and

Executive Leadership Team54 Public benefit58 Our employees60 Glossary

lr.org

Find out more about Lloyd’s Register online.

Lloyd’s Register Group Review 2012 1

Lloyd’s Register is a global organisation with a mission to protect life and property and advance transportation and engineering education and research

Our parent entity is a charity, Lloyd’s Register Foundation. Our operating company, Lloyd’s Register Group Limited, generates the profits that fund our public benefit activities.

Lloyd’s Register’s reputation as an independent body – with safety, integrity and high standards as its 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. We now 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.

We are uniquely placed to offer advice free from commercial constraints and to finding ways to improve how businesses operate, whether by carrying out our own research, funding others or providing training. To help our clients meet the technical challenges they face we believe it is important that we are at the forefront of technological innovation and we are building a global capability of collaborative research and development.

Our clients range from local businesses to multinational companies. They generally manage large, high-value assets where mistakes could prove much more than just financially damaging – at risk could be worker safety, local communities and the environment. In today’s complex world, organisations need advice and support they can trust.

2 Lloyd’s Register Group Review 2012

Who We aRe

Safety has been at the heartof our work since 1760

“ Working for Lloyd’s Register is a chance to add value to society. It’s a chance to drive up standards in design, manufacture, construction and maintenance. our employees solve problems with imagination and improve the world around us.”

“ I am extremely pleased to continue the growth of WeST and to secure the future of our valuable employees and customers by becoming a part of a company that shares many of the same values as us. The Lloyd’s Register Group shares our commitment to people and also has a reputation for excellence in independent verification services.”

Michael Montgomery Owner and founder of WEST Engineering Services, which joined Lloyd’s Register in April 2012


our work helps to ensure that our clients’ assets and processes are safe, responsible and sustainable

WhaT We Do

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.

£43.6 million Revenue decrease of 2.4% on the previous year (2011: £44.6 million)

Read more on page 26

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.

£387.4 millionRevenue increase of 2.5% on the previous year (2011: £377.8 million)


We provide 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.


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.

£284.9 million Revenue increase of 8.6% on the previous year (2011: £262.3 million)


ManagementSystems

We are an independent provider of business assurance 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.

£176.8 million Revenue increase of 3.7% on previous year (2011: £170.6 million)


We help our clients to ensure the quality construction and operation of critical infrastructure. We do this by surveying assets against internationally agreed rules and standards, some of which we have helped to develop. But our work involves much more than this.

There is an increasing need for the provision of sophisticated risk management services in relation to technical, safety and commercial aspects of our clients’ assets – ships, oil rigs, industrial plant, railways – throughout the asset life cycle. Our risk management services support better decision-making by contributing to a greater understanding and control of risks and their impacts.

The traditional ‘stamp of regulatory approval’ remains the dominant compliance model for these high-risk, asset-intensive industries. But we are going 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.


We bring together an extraordinary breadth ofexperience and expertisewithin a global team

Our expertise, together with our deep insight into the interface between assets, systems, people, and processes, means we are uniquely equipped to help businesses.

Knowledge

We have a profound understanding of the risks associated with the industries we serve – from energy exploration to LNG transport to food supply chain security.

Technical knowledge is at the core of our business. Our surveyors and assessors not only understand the industries they work in, they can also 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 with the concerns and issues that affect our clients. We have a global outlook but a local culture.

Our experts talk to your experts. And we can also communicate across all levels of our client’s business. People enjoy working with and for us because we have a clear purpose – working for a safer world.

expertise

Our reputation is founded on the deep knowledge and wide experience of the people who make up our teams around the world.

Their expertise is backed by our global research and development network that is helping us find new and better ways to improve safety and quality in the industries we serve.

hoW We Do IT


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.

We are guided by clear strategic objectives to achieve our goals under key themes.

Drive external focus – to make sure we consistently deliver the best possible value to our clients.

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.

Adding value to society – this is the key overarching theme that unites our whole strategy and fulfils our mission to make the world a safer place.

Critical infrastructure model – sectors on which society relies

Group strategy

System management

Design/engineer

Procure/fabricate

Install

Maintain

Decommission

Energy

Design/engineer

Procure/fabricate

Install

Maintain

Decommission

Water

Design/engineer

Procure/fabricate

Install

Maintain

Decommission

Waste

Design/engineer

Procure/fabricate

Install

Maintain

Decommission

Transportation Control system

Design/engineer

Procure/fabricate

Install

Maintain

Decommission

Marine

Business assuranceIn these sectors and others such as food, environment, education,public health, security, manufacturing – across the supply chain

Supply chain management


Global footprintyet local culture

We may have started in a London coffee house but we are proud that, with 7,885 employees based in 237 locations, we have a truly global reach. We can adapt our service offerings to suit businesses anywhere around the world.

Sustainability management system pre-assuranceLRQA, Inc. provides services to Southern California Edison


Global support to clientsThe design and build of Carnival Breeze, delivered in 2012 to Carnival Cruise Lines, involved our Trieste and London offices


Support for FPSo Terra Nova planned shutdownWe certify and class the vessel operating in harsh conditions


around the world

We have an unrivalled 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 genuine understanding of local issues and help you operate more safely and sustainably. Our global operations are divided into three geographical areas: Americas; Asia; and Europe, Middle East and Africa (EMEA). Read more on pages 46–49.

International antarctic expedition A four-man team from Lloyd’s Register joined an international expedition to the Antarctica, led by the renowned polar explorer and environmentalist Robert Swan, OBE, in March 2012


WheRe We Do IT


New fleet to the latest environmental standards Greek operator Almi Tankers took delivery of its first of 10 Suezmax tankers, LR-classed Almi Horizon


World’s longest driverless trainDubai Metro opened its second line extending the network to 75 kilometres


Inspections for Metro de MadridWe helped ensure the new Series 3000 vehicles fulfil specified technical requirements


Checking noise levels for offshore wind farm constructionWe provided data to help evaluate noise mitigation measures


energy management certificationAs part of their energy management strategy, Avnet Asia was awarded certification to ISO 50001 by LRQA


14% reduction in fuel oilThe MV Aquila, first in a new series of supramax bulk carrier designs, optimised to burn less fuel oil was delivered in China


Prelude FLNGLloyd’s Register is providing independent classification, certification and validation services to the revolutionary Prelude FLNG


europe’s first hybrid tugE-KOTUG, RT Adriaan, operates on diesel and batteries


New Group technology centresOur centres, based in Singapore and Southampton, will research challenges facing the marine and energy sectors

Read more on pages 23 and 39


Lloyd’s Register is a truly unique organisation and its role, assuring the critical infrastructure that society relies on, is now more important than ever.

“ My first full year in the role of Chairman of the Lloyd’s Register Group continued to be interesting, fulfilling and rewarding.”

Thomas Thune Andersen Chairman

The Group has continued to add value to society by focusing on the sectors that the world needs to operate safely and efficiently.

At the same time, the safety of our staff is paramount in all we do, and I am pleased to report that we continue to make good progress with driving safety performance into the organisation. We have, again, had a further significant reduction in our lost time incident frequency rate during the year, and have seen a 56% reduction over three years.

Key safety initiatives during the year include the development of a new OHSAS 18001 safety management system, with a pilot office in each region having been recommended for certification by external auditors; the roll out of a new suite of safety training; and the implementation of a global travel tracking and support service.

Financial performance I am very pleased to be able to report that, despite continuing tough global economic conditions, Group income at £893 million shows encouraging growth on 2011 (£855 million).

As an organisation which is established for the public benefit, our top-line performance is particularly pleasing given the continuing volatility in the world economy and is evidence of the advantages of the diversified portfolio of services offered by Lloyd’s Register. The anticipated weakness of our Marine revenues in the year did not fully materialise. Furthermore, the reported income for the Group has been enhanced by the acquisition of the WEST Engineering Group in April 2012.

The underlying income increased by £28.8 million, or 3.4% on a constant exchange rate basis, excluding acquisitions.

The Group operating surplus, before charitable donations, was £72.4 million (2011: £50.3 million), giving an operating margin of 8.1% (2011: 5.9%). After charitable donations of £0.2 million (2011: £10.4 million), the operating surplus was £72.1 million (2011: £40.0 million). The Group surplus after tax was £62.1 million (2011: £39.7 million). Further details of our financial performance are contained in the Chief Financial Officer’s overview on pages 50–51.

Income in our Marine business was up 2.5% up on the previous year (2.4% on a constant exchange rate basis). Although small, this increase is pleasing as the global shipping industry is facing tough times with freight rates remaining low and a significant decline in new orders.

Our Energy business generated an 8.6% increase on the previous year (8.5% on a constant exchange rate basis). This includes income from WEST Engineering, acquired on 30 April 2012.


ChAiRMAn’s Review

Our Transportation business income was down marginally at 2.4% on the previous year (1.2% on a constant exchange rate basis).

Our Management Systems business generated a 3.7% increase on prior year (4.2% on a constant exchange rate basis).

Adding value to society The organisation continues to focus strongly on its charitable objectives of advancing the safety of life and property, and the advancement of public education within the transportation industries and any other engineering and technological disciplines. Our intellectual capital is accessible to academics, students, regulators and professionals through committees, conference papers, publications and research papers.

Our charitable giving was £10.4 million in 2011, principally to The Lloyd’s Register Educational Trust (The LRET). In 2012, no donation was made to the educational trust since considerable efforts were being committed to establishing a new registered charity as the parent of the Group, to which a significant proportion of the Group’s investment assets would be transferred.

On 2 July 2012, Lloyd’s Register converted its status from an industrial and provident society to a company limited by shares, called Lloyd’s Register Group Limited. The shares in Lloyd’s Register Group Limited are now owned by a new parent, Lloyd’s Register Foundation, a registered charity. The Board considered that longer term this change in structure should increase the amount which the new parent charity would have available for charitable purposes.

The governance structure needed to evolve in this way to optimise our commercial operations which, in turn, fuel the charitable output of Lloyd’s Register. The new structure will support our ambitious agenda for growth and profitability and maximise funding for the Foundation.

Other matters The Trustees of the Lloyd’s Register Foundation are responsible for the charitable elements of the Group’s previous activities, including The LRET. The non-executive directors of Lloyd’s Register Group Limited, our operating group, are responsible for our commercial and business activities. As a result, the General Committee has converted into advisory committees that are aligned

with relevant business streams and will no longer have a governance role. The purpose is to channel the specific expertise of individual advisory committee members where they can add the most value.

It is immensely reassuring to know that the expertise, support and guidance of the General Committee will continue in its new advisory form for each business – and I thank every committee member as well as past members for their invaluable contribution to Lloyd’s Register’s success story.

I have thoroughly enjoyed working with my fellow Trustees and I would like to thank them for their valuable contribution during the year. My thanks also go out to our clients and partners for the trust they place in our organisation. Finally I would like to thank my colleagues and employees around the world for their loyal and valued efforts this year.


Charitablegiving

Lloyd’s RegisterFoundation (to

include The LRET)

100%shareholder

Lloyd’s RegisterGroup Limited

BusinessesGroup operations

Charitablegiving

Lloyd’s Register(101 operatingcompanies; 280

offices; 78countries)

Employees

The LRET

OperationsCharity

Commission

Previous structure new structure


We live in a world where the external challenges are becoming greater and require us to operate more efficiently and effectively. There are significant opportunities for growth – but we are also seeing stronger, more commercial competition, compounded by turbulent markets bringing price and revenue pressure. This means that we have to focus clearly on business performance in order to generate profit to be able to add value to society through our charitable activities.

On 2 July 2012, Lloyd’s Register converted its status from an industrial and provident society to a company limited by shares, called Lloyd’s Register Group Limited, our new operating company. The shares in Lloyd’s Register Group Limited are now 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. It also addresses certain governance issues.

We previously operated with a single Board of Trustees with both charitable and business responsibilities. We had a General Committee with both governance and advisory roles. Many of our employees also fulfilled both business and charitable roles. This led to a lack of clarity about roles and a dispersion of responsibilities. Charitable industrial and provident societies will in

future be regulated by the Charity Commission, which required us to focus on proper governance arrangements. It was therefore the Executives’ and Trustees’ opinion that the consequences of the UK Charities Act 2006 and the growing scale and complexity of the business required a restructuring to protect our charitable inheritance.

Importantly, the objectives and mission of the Foundation will remain the same as those of Lloyd’s Register previously.

There are many advantages to the new structure. It will:

• provide the two organisations (the charitable Lloyd’s Register Foundation and the commercial Lloyd’s Register operating group) with a governance structure that is fit for purpose and consistent with Charity Commission best practice

• clarify the roles and responsibilities of Trustees (of the Foundation) and the non-executive directors (of the Lloyd’s Register operating group)

• sharpen the focus of business strategy towards growth and performance

• better utilise the expertise of the General Committee members on new advisory committees

• enhance the long-term resources for the charitable Foundation to benefit society in line with the overall Lloyd’s Register mission and values.

The parent entity in the Lloyd’s Register Group is the Lloyd’s Register Foundation. This is a company limited by guarantee and a UK registered charity.

The Trustees and Members of the Lloyd’s Register Foundation are:

1 Thomas Thune Andersen Chairman

2 Christine Dandridge

3 Ron henderson Chairman, Audit Committee

4 Jan Kopernicki Chairman, Nominations Committee

5 Michael F Lykiardopulo

6 Lambros varnavides Chairman, Remuneration Committee

Lloyd’s Register Foundation

“ As we approach 2050, society will have to deal with high levels of population growth, reducing energy supplies, and other challenges, such as access to drinking water, and our role will become even more important.”


1

4

2

5

3

6


It has been an incredibly interesting and challenging year for Lloyd’s Register. We have faced significant market challenges, internal demands on resource and infrastructure and yet have posted our most successful results to date.

This year, at a global level there have been signs of economic recovery but equally signs of heightened risk.

The public backlash against austerity in Europe is destabilising and the future of the euro is still not guaranteed. We cannot predict the impact of changes in the political structure of the world’s two leading economies – China and the US. And this is all quite apart from the threats and opportunities we face from the ‘big picture’ – global trends of a growing population, increasing urbanisation and climate change.

These will have a profound impact on the world – and our business – for years ahead. The world faces a growth in demand for the basics of food, water and energy that could fuel unpredictable socio-political unrest and contribute to uncertainty in the global economy.

“ we face a number of emerging global trends that will have a profound impact on our business in the years ahead.”

Richard sadler Chief Executive Officer

We set out our sector goals in the critical infrastructure model and set an ambitious target of achieving £1.5 billion at 15% operating margin by 2015/16.

To secure a sustainable future in an increasingly competitive and consolidating marketplace, Lloyd’s Register needs to grow, both organically and inorganically. We need to match our competitors’ investment strategies and invest in technology to retain our edge.

There is now enough scale in the businesses to align our operating model strongly towards business streams. At the same time we will drive economies of scale through regional shared service centres. By introducing line of business strength supported by regional shared service centres we increase both efficiency and effectiveness. This new organisational structure will be in place by January 2013.

And yet the economic crisis that the entire world has endured for almost half a decade, has varied in its impact. Greece is not China, nor Seoul the City of London.

Lloyd’s Register, like millions of other businesses worldwide, is simultaneously adapting to the slowdown and preparing for a speed-up. For us this is involving a number of strategic changes to the structure of the organisation.

Group strategy Our group strategy is to add value to society and achieve sustainable growth for our clients. This comes through providing independent assurance and expert advice to clients operating the critical infrastructure that society relies on. These are clients who value the independent, global technical insight we can provide in our primary areas of operation: Marine; Energy; Transportation; and Management Systems.


ChieF exeCuTive’s Review

energy Despite uncertainty in many areas of the global economy, demand for energy continues to grow as developing countries respond to the challenges of urbanisation and the alleviation of poverty.

As a result, over the past 12 months, we have seen robust growth in demand for our services, particularly from China and other non-OECD countries.

Nuclear power is a key part of our energy sector operations and we have seen growth in our traditional inspection and certification services as well as our risk-based consulting activities. Scandpower’s RiskSpectrum software, for example, is used by 50% of the world’s nuclear power plants, and there is significant potential to grow this further.

Renewables represent another high-potential market, particularly with the development of increasingly complex wind turbine technologies. Here the technical assurance needs of complex technologies mean that we can play an ever greater role by leveraging our extensive experience of the marine and upstream sectors.

We have continued to reinforce our position within the energy industry, and have also increased the scope of consulting services throughout the Group.

In May, for example, as part of our strategic approach to non-organic growth, we acquired Houston-based WEST Engineering. WEST is a specialist in subsea applications. This, combined with ModuSpec’s specialised knowledge of drilling operations, and our human factors expertise, provides a strong platform for us to add value to the competence levels of asset maintenance staff.

Within the oil and gas sector, floating offshore installations are becoming increasingly important, and will be key to the future success of our organisation. We are therefore strengthening our teams to support international oil companies and offshore engineering contractors operating fabrication centres in Korea, China and Singapore.

sector reviews

Marine Although our involvement with the shipping industry goes back more than 250 years, Lloyd’s Register is not just a classification society. We always seek to look ahead, respond to change and provide services beyond traditional class to support shipowners and shipbuilders. Our marine business remains strong, and we expect the world fleet to keep growing despite global economic turbulence, and a clear oversupply of tonnage.

But slower growth means that freight rates are weak, and the industry is increasingly focused on reducing energy costs as a way of improving returns. We are therefore seeing an increasing focus on performance optimisation. This manifests itself in a number of ways: extensive research into new fuels; new ships being built with reduced fuel consumption designed in; and existing ships being operated more efficiently.

This is a clear opportunity for Lloyd’s Register, and one that we are responding to boldly.

We are establishing a brand new Group Technology Centre at the University of Southampton. This will operate alongside the Southampton Marine and Maritime Institute and the University’s School of Engineering Sciences. It is part of a groundbreaking partnership between industry and academia that will create a genuinely world-class facility and centre of excellence.

When it opens in 2014, 350 members of our Marine division will be based at the Centre.

The university is already known for its expertise in marine engineering and naval architecture, and at the new facility specialists in ship design and naval architecture, fluid dynamics and acoustics, will work together to better understand current and future maritime challenges.

“ To secure a sustainable future in an increasingly competitive and consolidating marketplace, Lloyd’s Register needs to grow, both organically and inorganically. we need to match our competitors’ investment strategies and invest in technology to retain our edge.”



ChieF exeCuTive’s Review

These two factors working together provide us with a unique opportunity to demonstrate the power of the LRQA Business Assurance model as the best mechanism available to companies to help them improve their performance and reduce their risk.

As part of our Group-wide gearing up for economic recovery, we are continuing to develop the LRQA Business Assurance approach in order to ensure it remains globally relevant. This is vital – not only for our own business purposes – but because our clients include some of the world’s best-known brands with operations and supply chains across multiple regions.

Looking ahead

I have been quoted a number of times this year with the phrase ‘we are not just a classification society’. In fact our broad portfolio demonstrates the breadth of independent assurance and expert advice we provide to not only the marine, energy and rail industries, but also a wide range of sectors through our Management Systems business.

The Lloyd’s Register story is an enduring success, as the unexpected and unwanted have come and gone over our 252 years. By investing for the long term we plan to continue to beat the global odds and secure a sustainable future.

Finally, of course, I would like to thank all of our clients for their continued support and extend my thanks to all of our employees worldwide for their dedication and hard work.


Our work on Shell’s floating liquefied natural gas project (see page 36), already involves us in the assessment of a broad range of often cutting-edge technologies – where in some areas we are establishing the parameters. We are, of course, still able to offer the traditional ‘stamp of regulatory approval’ to these high-risk, asset-intensive industries. But we are going beyond basic compliance to ensure that our clients’ integrity strategies are focused on operational and safety-critical areas.

This is central to Lloyd’s Register’s purpose.

We are also seeking to reinforce our position in the offshore sector, by establishing our second Group Technology Centre in Singapore.

Transportation Our Transportation business is focused on assurance and expert advice services for the rail sector, particularly in Asia, Europe and the Middle East.

Despite the economic problems in many of our key markets and the increasingly competitive nature of the sector, we saw strong overall sales growth in 2011/12, especially in the UK and Asia.

This included winning some flagship independent assurance assignments, which meant that we ended the year with our strongest ever forward order book.

LRQA The continuing global economic downturn has seen a significant shift in the perception of the importance of correctly implemented and certified management systems. Across a swathe of business areas this is now being seen as a driver of performance optimisation rather than as a ticking of necessary boxes.

Management systems can deliver tangible benefits and organisational competitive advantage. And this recognition is likely to increase with the planned revisions to the ISO standards, including the globally adopted ISO 9001 and ISO 14001, due in 2014–16.


Our business environment is more complex and fast-moving than ever. We face a number of emerging global trends that will have a profound impact on our business, and on the sectors that we serve, in the years ahead.

GLOBAL issues

The global issues that affect our business

Growing global population Between 1960 and 2000 the population of the world grew from three to six billion. It is now more than seven billion and is forecast to reach around nine billion by 2050. As an absolute minimum, these people will need food and water. They will also need somewhere to live. More of them are living in cities – two more every second, according to the UN. They want a better life: better food; better clothes; more opportunities. They will need transport and power.

Despite a growing global population, the availability of skilled workers is actually shrinking. We could see a ‘demographic divide’ between countries with younger skilled workers and those that face an ageing, shrinking workforce. Like many businesses Lloyd’s Register needs talented people with the right qualifications and there are already signs that competition is fierce to attract the best candidates in the many sectors we serve – oil and gas, rail, marine.

water supply For the past century water use has been growing at more than twice the rate of population, according to the Food and Agriculture Organization. By 2025, water withdrawals are predicted to increase by 50% in developing countries, and by 18% in the developed world. Although 70% of the surface of the earth is water and it falls free from the sky, less than 5% of it is suitable for human or animal consumption, and only 0.6% is easily accessible.

At the moment, water is normally priced at a low level that everyone can afford. However, this is unlikely to be the case in 20 years’ time. This means we need to treat water as a strategically important, non-renewable resource. With demand increasing and supply staying the same, the eventual consequences are not difficult to imagine. Increasingly, global thinkers are convinced that water shortages, or to be more precise, distribution, is becoming more of a threat to sustainability than energy resources.

Demand for energy World population growth and income growth drive the demand for energy. The International Energy Agency (IEA) forecasts global energy demand rising by over one third between 2010 and 2035. How this demand is met will evolve in parallel with the development of fuel availability, technology efficiency and environmental sustainability.

Globally, fossil fuels are expected to continue to dominate primary energy demand for the next 30 years although the balance between coal, oil and gas is changing. Renewables and natural gas are set to experience the largest growth globally. A recent IEA report shows hydroelectricity production could be doubled by 2050, an achievement that could prevent annual emissions of up to 3 billion tonnes of CO2 from fossil-fuel plants.

Energy efficiency will play an increasing part in meeting energy demands and contributing to cost-effective decarbonisation. The regulatory arena and market will need to combine to make sure efficiency is as prominent and attractive as renewables in making the energy supply more sustainable.

Advancing technology Changes in technology are revolutionising consumer and business expectations and forcing changes on old business models. The centre of economic and technological growth has shifted from advanced to emerging economies, from West to East. Technological innovation can drive a nation’s economy forward and create jobs. Businesses and markets that can leverage technology’s rapid advances will be market share winners. We must ensure that Lloyd’s Register maintains its position at the forefront of innovations in the sectors we serve and our new Group technology centres will play a large part in this.

Climate change Interrelated to many of these trends are the issues of greenhouse gas emissions and climate change. Creating a sustainable global food system that will eradicate hunger is one of the greatest challenges facing modern civilisation. Yet the current global food system is one of the greatest emitters of the greenhouse gases that are currently responsible for warming the Earth.

Air pollution from ships is a global political and regulatory challenge as pollution does not recognise political boundaries and yet all of society benefits from, and is dependent on, efficient low-cost transportation by ships.

With climate change increasingly impacting on extreme weather events and the availability and supply of materials and resources on a global scale, there is more need for organisations to adapt to these changes to ensure their sustainability.

Looking ahead

In recent decades we have seen incredible global changes in communications, transportation and technology. Looking ahead we need to consider carefully the opportunities and risks presented by evolving trends. It is vital to have the right strategy, organisational structure and people, to constantly monitor broad trends in the external environment and embrace technology.

At the start of each of the following business sections we give an overview of the issues facing each sector and take a look ahead.

25bnUnder current fertility rates, the world’s population will pass 25 billion before the end of the century

75%75% of the population will be in urban settlements by 2100

96%World energy demand: OECD/Non-OECD (tonnes of oil equivalent)

Emerging economies make up 96% of growth in demand

OECD Non-OECD

2010 5.6bn 5.8bn

2030 6.4bn 10.9bnSource: BP’s Energy Outlook 2030


We are dedicated tosupporting innovationin shipping

We work with you to deliver tailored solutions through every stage of your ship’s life based on unrivalled experience and the latest technical insight.

Life extension works to the LNG carrier Northwest Sandpiper, attended by Lloyd’s Register marine surveyors in Sembawang Shipyard, Singapore.


BUSINESS REVIEW | MARINE


What we do

As a leading marine classification society, we set safety and environmental standards for the design, construction and operation of ships. What we do is vital in ensuring that shipping is as safe and clean as possible. But we are not just about surveying ships; we are dedicated to looking ahead, responding to change and supporting the development of new technologies and innovations that will play a vital role in the immediate and long-term future of shipping.

Where we do it

Our Marine offices and surveyors are based in shipping ports, towns, cities and shipyards around the globe. Our shipyard activity is heavily concentrated in the main shipbuilding countries of Korea, China and Japan. We are also very active in shipyards worldwide but particularly where specialised vessels and yachts are built. Our operational offices that conduct periodic ship surveys are everywhere that ships trade.

How we do it

We apply our technical rigour, judgement and experience to ensuring that standards are met and that risks are recognised and understood. Lloyd’s Register’s Rules set the standards, but rules do not always exist for the growing number of novel concepts that are emerging today. This is where we apply risk assessment methodologies to provide clients and stakeholders with the information that they need to make effective decisions. Our new Group technology centres will work alongside top maritime universities to help keep us at the forefront of the best research, technology and engineering methods to support performance optimisation.


1

2

34

5

76 9

8

1 Electricity and heat production – 35.0%2 Other – 15.3%3 Other energy industries – 4.6%4 Manufacturing industries and construction – 18.2%5 Other transport (Road) – 21.3%6 Rail – 0.5%7 International aviation – 1.9%8 International shipping – 2.7%9 Domestic shipping and fishing – 0.6% Data source: Second IMO GHG Study 2009

Data source: MSI Ltd Forecasts

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Data source: MSI Ltd Forecasts – 2012Q2

Seaborne CargoWorld Fleet >5k GT

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World seaborne trade and fleetdevelopment outlook – 2020

INDUSTRY ISSUE 01

Supply and demandWorld trade relies on ships. Despite the economic turbulence, there are now more ships than ever before in history and we can expect the world fleet to keep growing. But as the world adjusts to slower growth rates, freight rates are weak. New ships now need to be built with reduced fuel consumption and existing ships need to be operated more efficiently. Right now, as well as research on new fuels we currently see a focus on performance optimisation to reduce energy costs. This involves using sophisticated tools driven by the expertise of fluid dynamics technologists and energy management specialists.

INDUSTRY ISSUE 02

EnvironmentNew environmental legislation continues to challenge shipping – particularly emissions and ballast water compliance. With the mandatory deadline of the International Maritime Organization’s (IMO) energy efficiency measures under MARPOL Annex VI in January 2013, environmental issues are top of the shipping agenda.

An even bigger challenge than local air quality is global greenhouse gas (GHG) emissions. Although the shipping industry has led the way through the IMO in developing regulatory instruments to reduce GHG emissions, it seems likely that shipping will be affected by local, regional or global market-based mechanisms intended to help slow or reduce global warming.

INDUSTRY ISSUE 03

Fuels of the futureLNG has been dubbed ‘fuel of the future’ and we are enthusiastic about its impact on local air emissions but there will be others regarded as such including methanol (which may be made from natural gas), biofuels and hybrid solutions such as fuel cells. LNG’s low suplhur dioxide (SOx), nitrogen dioxide (NOx) and particulate emissions is highly suitable for specialist applications such as ferries in emission control areas (ECAs) where local availability, regulation, taxation and demand are driving change – particularly in the Baltic Sea and in Norway.

Looking aheadDue to rising energy costs, we expect that alternative fuels will very slowly dilute the shipping industry’s current reliance on fuel oil. But it is expected that fuel oil or diesel will remain dominant for the foreseeable future in the mainstream, deep sea trades.

Shipowners, ship designers and shipbuilders are beginning to investigate new designs, new technology, and new fuels as well as new operating strategies. As ever, the challenge for the market is when to invest.

Industry overview

Shipping makes world trade possible but managing the ocean environment and managing it well is crucial. Times are tough for shipowners. Freight rates remain low and new orders have declined substantially. At the same time, new regulations and technical developments have increased complexity for all marine stakeholders.


Global CO2 emissions


For the past couple of years we have talked about a ‘new paradigm’ as our industry becomes familiar with requirements that focus on reducing environmental impact. In 2011/12 we saw changes happening. New fuels, new engines and new designs are becoming available. What concerns shipowners, builders, equipment makers and financiers is how best to use these new technologies to make shipping more efficient, and when to invest.

Our role is to help the industry through these changes. We have had a very positive year developing innovative technologies and using new thinking to help our clients lower costs and reduce emissions. We have worked with Viking Line to build Viking Grace, the world’s most environmentally friendly large passenger ship and we have classed the world’s first liquefied natural gas (LNG)-fuelled tanker, Argonon. It is the success of these and many other pioneering projects that drives us to continue responding to the industry but also to look ahead, and produce groundbreaking solutions for our clients.

“ Marine’s main priority is safety at sea, and it always will be. But during 2011/12 we’ve seen an increasing demand for services that go beyond traditional classification to support shipowners and shipbuilders.”

Tom Boardley Marine Director

New compliancesA major challenge the shipping world faces is the need to reduce the environmental impact of shipping while maintaining efficiency and keeping costs down. And it is at the top of shipowners’ and shipbuilders’ agendas as the IMO’s Energy Efficiency Design Index (EEDI) and Ship Energy Efficiency Management Plan (SEEMP) are coming into effect in January 2013.

As an organisation that is known for being committed to safety and the environment, we are well placed to provide impartial technical guidance through these challenging times. We work closely with main engine makers, with academia and research projects around the world, to better understand and influence the evolution of technology and operations. Our engagement with manufacturers of new technology is very important. Examples include recent joint industry projects with Bestway Marine Engineering Design Company and Jiangmen Nanyang Ship Engineering, described in more detail on page 24.

1,064m gtThe world fleet is now bigger than ever, at 1,064 million gt (vessels 100 gt and over) (2011: 1,014 million gt)

56,000 gtLloyd’s Register is classing the world’s largest LNG as fuel application to date – the 56,000 gt Viking Grace

Worldwide network“The delivery of Astra Centauru was greatly assisted by Lloyd’s Register’s worldwide network of technical experts in South Korea, the UK, Greece and China, who provided excellent levels of service”

Principals of Rethymnis & Kulukundis Ltd

Marine overview

Our Marine business evolves with the shipping industry. Our strategic research means that we remain well placed to provide impartial technical guidance and verification, helping to ensure that design and operational solutions are safe and efficient.


“ As regulations concerning vessel emissions to air become more stringent, this [Lloyd’s Register’s] exhaust gas treatment systems guide will be of considerable assistance to shipowners and operators as they look for the most cost-effective means of compliance.”

John Aitken General Secretary, Shipping Emissions Abatement and Trading

With new technologies emerging, providing the right support throughout the decision-making and design process is critical. This year we produced a new guide ‘Understanding exhaust gas treatment systems’ which provides owners and operators with technical information they need to find cost-effective solutions. Exhaust gas treatment systems (EGTS) are one of a number of options available to meet ever-stricter emissions regulations. The guide provides a clear picture of the technical realities involved in installing and operating EGTS, using case studies and real-world examples. The guide was developed with the support of Shipping Emissions Abatement and Trading (SEAaT), an organisation comprising owner-operators who are looking for cost-effective compliance solutions.

The challenge of meeting emissions-compliance requirements and reducing ship-energy consumption are closely related. Earlier this year, we introduced our ECA Calculator, a cost-scenario modelling tool, to help the industry to identify cost-effective routes to emissions compliance.

The EGTS guidance, providing technical insight, and the ECA Calculator are the latest products we have produced to support the industry with the dual challenges of compliance and energy management. They have been welcomed and used by many clients.

With our ISO 50001 energy management certification and trim optimisation services and design support, our clients are in a stronger position than ever to reduce their emissions and fuel consumption, giving both commercial and environmental benefits. Testament to our work is the project with Delphin at Jiangsu Hantong (HTS). We

supervised the design appraisal, build and sea trials, verifying the performance of a new, modified 57,000 dwt ship, Aquila, based on a SDARI design. The ship has seen a 14% reduction in fuel oil consumption, as described in more detail on page 24.

New shipsAs we sit on the brink of the ‘new paradigm’ of shipping we have made a commitment to help with the development of environmentally friendlier ships. This has been showcased in a number of ships we have classified in the last year, the Almi Horizon, RT Adriaan and Viking Grace.

The 157,787 dwt Almi Horizon is the first of seven tankers being built by DSME to Lloyd’s Register class. The tanker has been verified by Lloyd’s Register to comply with the voluntary energy efficiency requirements of the EEDI for new ships. She is equipped with a UV ballast-water treatment system and features an Inventory of Hazardous Materials in accordance with Lloyd’s Register’s Green Passport service.

Almi Horizon and six of her sister ships have been designed to be built to Lloyd’s Register’s Environmental Protection (EP) notation, which recognises their enhanced features and demonstrates the owner’s commitment to, and investment in, environmentally friendlier ships. The vessel has also been enrolled in Lloyd’s Register’s Ship Emergency Response programme.

The RT Adriaan, a 32-metre Rotterdam-based tugboat has been revolutionarily refitted and turned into Europe’s first hybrid tug. This member of the KOTUG fleet is able to carry out its daily operations with radically reduced emissions and in some cases noiselessly and solely battery powered.


The vessel has an AKA Canada-built system that can switch propulsion between diesel and electric sources leading to 50% less harmful emissions, improved fuel economy and CO2 reduction and cleaner combustion. Its hybrid technology allows its main engines to be shut down while the vessel is in transit.

Lloyd’s Register approved the vessel and guided the designers through the conversion process, which was carried out in only a few weeks to reduce the vessel’s out-of-service time.

E-KOTUG was nominated for a Lloyd’s List Environment Award 2012.

New thinkingAs the market demands evermore fuel-efficient ship designs, shipowners and builders need to understand and adopt the latest cutting-edge technologies and exploit every opportunity in an evolving global market. We have developed a unique methodology to guide shipowners, designers and builders through the latest design processes.

We need to fully understand future fuels, future engines and future designs in order to approve and accept novel concepts where there are no rules in place. This daunting challenge demands new frontiers in technology to be not only explored but actually adopted and approved almost simultaneously.

Many ideas can be made safe but the concern is how to know that a concept is appropriate and that investment should proceed. Furthermore, some concepts can be dropped, but for those that are adopted how do we ensure that a new and novel design really can be classed?

Clients need to know what they can do – not what they cannot do.


Viking Grace

The float-out of M/S Viking Grace, the world’s most environmentally friendly large passenger ship, being built for Viking Line, was performed at STX Turku Shipyard in August 2012.

It is fuelled by LNG. Emissions into the sea have been totally eliminated, and emissions into the air are remarkably lower than those of any other big passenger ships. Lloyd’s Register carried out the classification and risk analysis of the vessel which features a large variety of technological innovations and has attracted a lot of attention. The 218-metre-long cruise ferry, to be delivered to the customer by the Turku Shipyard at the beginning of 2013, will operate on the Turku (Finland)–Åland Islands–Stockholm (Sweden) route. The vessel is providing some 2,600 man-years of labour to the shipyard.

“We are very pleased to be able to float-out this magnificent cruise ferry according to plans. The project has progressed in good collaboration with the client and vendors. After this float-out, the works will continue actively by final installation of the various systems of the ship and by interior outfitting. The ship will be ready for delivery to the customer at the beginning of next year.”

Jari Anttila, EVP and COO of STX Finland, and Director of STX Turku Shipyard.

In answer to these questions, Lloyd’s Register has developed a specific risk methodology for shipowners and builders developing new ideas or completing vessels. This is based on a four-stage process that covers a scoping exercise, concept or initial assessment, a detailed synthesis of design solutions and then a final assessment.

The methodology, which was used with risk analysis of the passenger ship Viking Grace (see above), is a scalable process for all risk-based designs, and is structured so that the scoping phase sets an agenda that decides which risk studies to perform. The extent of the resulting scope depends on a design’s degree of novelty, complexity and safety concerns. The synthesis stage involves developing with the designer the type or depth of detailed assessments needed to achieve the appropriate levels of safety that exist in prescriptive classification rules. The final stage includes operational risk studies on the design as it approaches completion, so that all hazards associated with the operation are pinpointed and dealt with.

New alliance In 2014, our 350 marine headquarters employees will move into a brand new Group Technology Centre on the University of Southampton’s Boldrewood Campus, where we will be co-located with both the Southampton Marine and Maritime Institute (SMMI) and the university’s School of Engineering Sciences.

We chose to have one of our Group technology centres in Southampton because it is at the heart of world-class marine engineering and naval architecture. The move to Southampton will be in parallel with plans to establish a Lloyd’s Register Group Technology Centre in Singapore that will focus on the energy sector. Specialists in ship design and naval architecture, fluid dynamics and acoustics, oceanography through to arts, humanities and social sciences will work together to better understand current and future maritime challenges.

The move to Southampton is already well under way. We currently have temporary offices in Southampton city centre where 100 employees will be working by the end of 2012, with further employees gradually joining them until the new building is ready.

The SMMI is a collaboration between Lloyd’s Register and the University of Southampton. It aims to be a world leader – a unique internationally recognised centre of excellence, bringing together a research, innovation and education community from universities, research institutes, industry and governments. The SMMI, launched in March 2012, covers ship science and maritime engineering, maritime law, ocean sciences, marine logistics and finance, maritime archaeology and even literature and history based on the oceans. The SMMI will support research collaboration, knowledge partnerships and provide access to laboratories and test facilities contributing to a growing maritime cluster of innovation.


“ Certification to ISO 50001 was a milestone ... an effective and efficient energy management system for the operation of our fleet brings real added benefits to the company and it allows us to be proactive in satisfying upcoming regulations, customer requirements and society’s expectations.”

Stavros Hatzigrigoris Managing Director, Maran Tankers Management

Marine project highlights

World’s first new LNG-fuelled tanker The world’s first newbuild LNG-fuelled tanker was delivered in December 2011 to Lloyd’s Register class, heralding the start of a new era of cleaner shipping for Europe’s local waterways. The delivery of MT Argonon, a 6,100-dwt dual-fuelled chemical tanker, represents a significant milestone for the Deen Shipping subsidiary, Argonon Shipping, in its pursuit of cleaner transport solutions for Europe. Lloyd’s Register helped the owners and regulators to identify their risks, meet regulatory requirements and overcome the technical challenges for the precedent-setting tanker.

Tool to help manage risks in icy watersWe launched a vital new tool to help shipowners and operators assess designs and reduce the risk of fatigue damage in the hull structures of their ice-strengthened vessels. The timely development of new procedures under the notation, ShipRight FDA ICE, comes as changes in the exploitation of natural resources, the climate, world trade and marine infrastructure are increasing marine activity in cold-climate areas.

14% reduction in fuel oil consumption confirmed in new bulk carrierLloyd’s Register supervised the design appraisal, build and sea trials, verifying the performance of a new, modified 57,000 dwt ship based on a SDARI design. The MV Aquila, first in a new series of supramax bulk carrier designs optimised to burn less fuel oil, was delivered in China. The efficiency improvements were achieved by carrying out a number of straightforward – but effective – changes including: de-rating the main engine; a new propeller design which has been optimised for the de-rated engine; and fitting a Mewis Duct.

Royal barge heads UK Jubilee convoyThe build of Gloriana, the first royal barge to be built for almost 100 years, was supervised by Lloyd’s Register. The barge led the UK’s Diamond Jubilee flotilla of ships along the River Thames. While the vessel was not classed she was certificated as an MCA Class V Passenger Vessel and it was our responsibility to ensure that the hull was built in accordance with the approved plans and that the machinery and electrical aspects complied with our special service craft Rules. The barge carries the Lloyd’s Register coat of arms.


Ship recycling guide Advances in recycling methods and changes to the less-regulated practice of beaching are highlighted in a Lloyd’s Register guide for shipowners, operators and builders published in 2011. The guide gives practical advice to shipowners who are planning to recycle their vessels from the initial ship recycling policy stage to the yard inspection and the final ship-dismantling process.

JIPs in ChinaTwo joint industry projects (JIPs) during the year involved Chinese companies. The first was the planning and design of Emerald, an ultra eco-friendly handysize bulk carrier, with the Shanghai-based Bestway Marine Engineering Design Company. When built, the 35,000 dwt mid-size handysize bulk carrier will improve the current EEDI performance of a standard bulk carrier by 18%. The second was a JIP with Jiangmen Nanyang Ship Engineering (JNS) and Bestway to help support the design and optimisation of a slightly larger 39,000 dwt bulk carrier with multiple green features.

Life extension works to the LNG carrier Northwest Sandpiper, attended by Lloyd’s Register marine surveyors in Sembawang Shipyard, Singapore.

The 20-year-old LNG vessel is undergoing major repairs and upgrading which will further extend the vessel’s trading life for another 10 years or more, ensuring it remains fit for purpose to the highest standards of safety, reliability and integrity. It is one of the fleet of seven purpose-built vessels owned by North West Shelf Shipping Service, providing the vital shipping link between the North West Shelf Venture’s LNG production facilities in Australia and its customers in North Asia.


Global supportto clients

Carnival Breeze, delivered in May 2012 to Carnival Cruise Lines, is a typical example of how various parts of Lloyd’s Register work globally to support our clients with complex assets.

Lloyd’s Register’s support for our clients started with design support and technical specialists working to ensure that the ship concept design was compliant with our Rules and international standards. Our design support teams – naval architects, electrotechnical, engineering and fire safety specialists – in Trieste and London then worked together to review and approve the significant quantity of plans and information required for this complex ship. As the steel cutting and build process started we had another team of surveyors with hull, engineering and electrical backgrounds in the shipyard.

The site survey work is not just about checking the build, it continues through the build process to verification and validation of commissioning and sea trials all the way to the delivery and issuing confirmation that the ship can be classed by Lloyd’s Register and issued with the famous 100A1 class notation. Globally, a team of about 30 surveyors and technical specialists, from the design support offices to the shipyard site team and the inspections at manufacturers’ works and steel mills, put in over 6,500 survey hours to support our clients in the process of making this concept become reality.

Now the ship has been handed over from the shipyard to the owner our involvement continues. Other surveyors from our global team will be involved in auditing and surveying the ship on an annual basis to ensure compliance and to maintain issuance of the ship’s certificates throughout the life of the ship.

Carnival Breeze • Capacity: 3,690 passengers, 1,386 crew • 28,500 gt• Length: 305.6 metres

Looking to the future

Marine’s future lies in continuing to support and understand ship safety and ship performance as new environmental requirements come into place. During this new chapter we will make sure that all our future research and innovation remains focused and filters into the industry.

Ships have to become more efficient and we need to understand fuels, engines and designs that can work safely and cleanly. Now more than ever, shipowners need to know what these future technology challenges mean, what will work and when. We also recognise these challenges are coming at a time when shipowners are facing a difficult financial environment.

We will reflect this in our activities as a classification society as we seek to make the most of our skilled and highly specialist employees.

We are focused on putting academic research, ship science practice and commercial expectations together and we are moving closer to a model that we hope will become more common. Our new Lloyd’s Register Group Technology Centre in Southampton is concrete proof of this. We will be part of a maritime operating cluster involved in shipowning, regulation, oceanographic research and maritime law research – all connected to other clusters and centres of innovation as well as global marine activity.

We have a clear strategic understanding of the importance of shipping. This means we can support our clients and make sure shipping continues to serve society effectively, efficiently and cleanly.


In an industry where safety is paramount and performance increasingly scrutinised, choosing Lloyd’s Register sends out a clear message that your business is committed to operating in a safe, sustainable and efficient manner.

Rail expertise you can trust

This year saw the first batch of V250 trains, branded Fyra, delivered to NS Hispeed for entry into service between Amsterdam and Brussels. This is a project that has closely involved our Utrecht office.



BUSINESS REVIEW | TRANSPORTATION

What we do

The work of our Transportation business is primarily focused on the rail industry and in the provision of expert advice and assurance services aimed squarely at improving the safety, quality and performance of rail systems across the world. We support a wide range of organisations in this sector – operators, manufacturers, maintenance companies, infrastructure managers, investors and regulators – for whom shortfalls in quality can result in punishing financial and reputational consequences, significant impacts on surrounding communities and even risk to safety.

Where we do it

Our teams of rail engineers and technical specialists are based across Europe, the Middle East and Asia and undertake work on systems of all size and purpose, from high-speed international routes through to local light rail schemes. Our clients range from some of the world’s largest rail administrations to niche component suppliers.

How we do it

Technical knowledge is the backbone of our business. We offer specialist advice and support across rolling stock, signalling, safety engineering, human factors, energy efficiency, project management, software, civil engineering and asset management, among others.

We are also one of the leading providers of condition monitoring services for the rail industry, having developed a range of measurements and analysis systems that are used by train operators and network managers to identify real-time wear and tear of assets and improve ongoing maintenance and operational procedures.


Industry overview

Despite the prevailing economic uncertainty, the global rail supply market has proven itself resolute, with various independent forecasts projecting annual growth within the sector of between 2.5%–3.3% over the next five-year period.

INDUSTRY ISSUE 01

Limits to high speedThough portrayed as the epitome of modern-day rail transport, high-speed technology is approaching its 50th birthday (Japan’s Shinkansen opened in 1964). Yet beyond established networks across Japan, France, Germany and only more recently, Spain, Italy and China, high speed is limited to a few hundred miles here and there. Though schemes are frequently announced, most find the costs become too prohibitive and many suffer from ambitious patronage predictions. In truth, high speed works best when connecting two highly populated clusters on unbroken journeys of two to three hours. On shorter or longer routes, or where stops are required to increase numbers, the advantages quickly dissipate.

INDUSTRY ISSUE 02

Pricing key to regional railRail might hold the high ground in terms of its environmental performance over other modes but studies show that few passengers take this into account when making travel plans, with cost and convenience proving more influential. Regional rail tends to capture higher market share on inter-city routes in countries where, for example, motorway tolls are prevalent and there is a lack of domestic coach services offering cheaper point-to-point tickets. Operators are therefore under constant pressure to price competitively yet also increase capacity and frequency while reducing overall operating costs.

INDUSTRY ISSUE 03

Funding for urban railUrban rail is expected to be the largest growth area with many of the world’s most populous centres still lacking sufficient metro or light rail systems. However, costs can range from US$25 million/km for a street-level tram to upwards of US$300 million/km for an underground system. In order to help fund new construction many cities now seek to link plans to lucrative surface developments and other revenue streams, leading to some operators, particularly in Asia, drawing as little as 25% of total revenue from the fare box whilst recouping almost 50% from property, retail and hotel developments above the stations.

Looking aheadOver the longer term the prospects for the rail sector remain positive as a mix of urbanisation, environmental targets and increasing demand for mobility, among passengers and freight movers, encourages policymakers to look to the railways as the preferred mode of transportation, not only within and between their own communities but also to neighbouring countries.


A feature of this industry is the varying degree to which it is established from one country to the next. In some markets the industry has already matured, with operators and maintainers alike primarily looking for technologies and systems that can help improve efficiencies and increase capacity on overcrowded networks. In other territories, rail is being introduced for the very first time and is thus looking to develop the necessary skills base and regulatory structure. The challenge here is to ensure that the quality of build and standards of service are sufficient to break existing transport habits.

1 High-speed train2 Rapid train3 Commuter train4 Regional train5 Bus6 Car7 Aeroplane

Data source: UIC, International Union of Railways, 2012

Energy efficiency

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Development of the worldhigh-speed network

Data source: UIC, International Union of Railways, 2012


Transportation review

Our Transportation business closed the year in possession of its strongest ever forward order book following a succession of appointments to some of the world’s most high-profile projects.

The Transportation business is centred on providing assurance and expert advice for the rail sectors in three core areas: Asia; Europe; and the Middle East.

This was a direction embarked upon following a 2010 strategic review of the business, with 2011/12 therefore only the second full year under the present structure. Given this context, the progress made over the past year – amid the economic uncertainties that have prevailed across our key markets – is particularly encouraging.

The UK and Asia operations both reported notable sales growth – including several flagship independent assurance assignments – and though our largest market, the Netherlands, grew at a slower rate, it still represents a solid performance in view of the deep spending cuts affecting the Dutch economy. Overall the year ended with the business in possession of its strongest ever forward order book.

In addition to our progress with client work, we continued to invest in new services to maintain our technical edge in this very competitive market. Examples of note include the extended range of courses of our Transportation Academy, which now

offers more than 70 different programmes, and Smartfleet, remote monitoring services for fleet management. Smartfleet is used by NedTrain (the maintenance company of Dutch Railways) for monitoring their VIRM intercity fleet and the monitoring preparations for NS Hispeed for Fyra, the new high-speed train between Brussels and Amsterdam.

Underlining our future ambitions, this year saw the opening of a purpose-built headquarters for the UK business. Named Edward Lloyd House, this new building is positioned prominently in the heart of Derby’s rail technology cluster and replaces two smaller offices in the city centre and in nearby Belper.

Flagship appointmentsThe lead headline this year has been the securing of a succession of major assurance assignments on some of the world’s most high-profile rail projects.

In November 2011 we were appointed as the independent safety assessor (ISA) for Etihad Rail, a new 1,200-kilometre national railway that will stretch across the UAE from the Arabian Gulf to the Indian Ocean. This was followed by a similar appointment for the programme of railways to be constructed in Qatar, much of which is in preparation for its hosting of the FIFA World Cup in 2022.

“ We have continued to invest in new services to maintain our technical edge in this very competitive market.”

John Stansfeld Transportation Director

75 kilometresWe were the independent safety assessors for the Dubai Metro, at 75 kilometres the world’s longest driverless rail system

15 metrosIn China we have certified signalling systems in 15 different city metros

0 to 500,000Our work with a leading freight operator, GB Railfreight, led to an award-winning design for transporting biomass via the UK rail network, enabling our client to grow from zero to moving more than 500,000 tonnes of biomass in just 12 months


What we are witnessing here is the evolution of an entirely new market for rail. The Middle East and North Africa region has one of the lowest density rail networks in the world and, as was the case with the Dubai Metro (see next page), the plans in Qatar represent the first ever railways to be built there.

UK market position strengthenedA third landmark contract this year was our appointment as the notified body for the central section of London’s Crossrail scheme. With 21 kilometres of twin-bore tunnels running east-west beneath the city, it is currently Europe’s largest engineering project.

In addition to Crossrail, the UK business has continued to support key clients including: the infrastructure manager, Network Rail; London Underground; the rolling stock manufacturer, Bombardier; and operators such as Northern Rail and Virgin. At the same time it also extended into new service areas for example, wheel-rail interface assessment, freight vehicle approvals and incident investigation.

Cross-border focus in EuropeThis year saw the first batch of V250 trains, branded Fyra, delivered to NS Hispeed for entry into service between Amsterdam and Brussels. This is a project that has closely

involved our Utrecht office, which provided technical support since 2004 and completed the investigation for the vehicle’s certification for conventional and high-speed routes in both the Netherlands and Belgium. In order to prepare these vehicles for service we performed some 50 subsystem design reviews, 35 factory acceptance tests and 63 type test procedures and reports to validate about 7,000 requirements that had to be managed between more than 15 different organisations.

Signalling will be a key part of our growth in Europe. During the year we were appointed by Infrabel, the Belgian national infrastructure manager, as the notified body to certify the implementation of European Train Control System (ETCS) level 1 on the freight corridor, ‘corridor C’, that will connect Antwerp’s harbour to Europe’s main networks. Equally, the decision of the Dutch national parliament to implement European Rail Traffic Management System (ERTMS) signalling nationwide will open consultancy, testing and certification opportunities across a range of concerned parties, in particular NS Dutch Railways, one of our largest clients.

In Scandinavia we began work as the ISA for the new light rail system in Aarhus, Denmark. Group member Scandpower

was chosen by NSB, the Norwegian passenger operator, to review the maintenance programmes for their Type 73, Type 72 and Type 93 vehicles. All of the leading Scandinavian operators are now applying Scandpower risk management methodologies in their maintenance programmes.

In Spain we have widened our client base through a number of new ISA assignments in addition to the rolling stock inspections for which we have a strong reputation in this market. This year the office also achieved accreditation as a Designated Body to apply the National Notified Technical Rules for rolling stock.

Western standards sought in AsiaThough Asia has not been immune to the global downturn, the outlook for our business remains positive. New assignments this year included work on metros in Bangkok, Hong Kong, Chongqing and Beijing, and product certifications such as the safety assessment of new signalling technology for the Korean Railroad Research Institute. New clients such as Samsung SDS (a signalling technology developer) were added to the client roster while a project with Kyosan represented our first transport contract in Japan.


Metro de Madrid Series3000 metro vehicles

Lloyd’s Register has provided Metro de Madrid with independent quality inspection services for its new Series 3000 metro vehicles that are now being introduced into passenger service.

The inspections were undertaken throughout the manufacturing, assembly, testing and commissioning stages, giving our client the additional guarantees that their new vehicles fulfil their specified technical requirements.

We also continue to monitor the performance of the vehicles during an initial warranty period, providing regular feedback about whether they are meeting intended reliability, availability and maintenance requirements.

Any non-conformities are duly identified and recorded and then the inspectors will follow these issues until their appropriate resolution is agreed and proven by the manufacturer.

Our geographic scope ensures that we can provide regular inspections at both the manufacturing plant (the Series 3000 vehicles are manufactured by CAF in Beasain, northern Spain) as well as in Madrid for their final testing prior to passenger operation.


Across the region we are seeing an uptake in the use of Western standards for systems assurance – and for safety in particular – which will ensure continued demand for our technical edge in this arena. In China alone we have certified signalling systems in 15 different city metros and with almost 30 cities across the mainland currently planning or constructing new metro systems, we expect this market, served through our joint venture CCS LR, to remain particularly strong.

The recent intensive period of new build across China – from urban metros through to its national high-speed network – has also opened a new market for operations and maintenance advice and we anticipate opportunities ahead for services such as safety management systems through to human factors.


The challenge ahead is to extend revenues from the technical expertise side of the business while looking to move into new geographical markets.

This will require appropriate resourcing and we have therefore stepped up efforts to recruit the necessary skills across each of our regions and will maintain this momentum throughout the coming year.

In an industry under pressure from governments worldwide to provide an increasingly safe, efficient and sustainable mode of transport, we anticipate a long-term demand for technical expertise and systems assurance in this sector.

From the progress we have already made over such a relatively a short period of time, we enter the coming year from a position of considerable strength.

“ Being PAS 55 certified demonstrates that the whole organisation is aligned to one single strategy that ensures we have effective, long-term plans in place that are linked to our upgrade and maintenance activities. This helps us to deliver our commitment to give customers a world-class ‘Tube’.”

Mike Brown Managing Director, London Underground

Dubai Metro

With the opening of its second line in September 2011, the Dubai Metro became the world’s longest driverless railway. The new line extended the network to 75 kilometres, with more than 40 stations served by driverless trains reaching speeds upwards of 85km/h.

The Dubai Metro has consistently maintained a ‘99.9%’ score in terms of punctuality and reliability, carrying 300,000 passengers per day through routes that mix urban and desert terrain.

We were closely involved with the project from the outset, having been appointed as the ISA for the railway during the detailed design stages in 2006. Our remit was to assure the safety of passengers, staff and the general public by supporting all aspects of design, construction, testing, operations and maintenance.

One of our biggest challenges was the local climate – one of the most hostile environments in which an urban metro has ever been constructed. With year-round temperatures ranging from 1°C to 52°C, solar radiation levels of up to 780 W/m2 (the average is 250 W/m2), wind-blown sand and dust at speeds reaching 160km/h, and a corrosive atmosphere with high levels of salt, ensuring that sustainable standards of safety were present during design, construction, and operation and maintenance was of paramount importance.

“While 12 kilometres of the Metro is in tunnels, the remainder is exposed to the extreme temperatures of the desert. So the designs and safety plans needed to support all possible scenarios,” said Mike Elliott, Project Leader for Lloyd’s Register.

“It was equally important to ensure all equipment was specified for high levels of sand, dust, salinity, humidity and temperature, with appropriate maintenance regimes specifying, for example, that filters are cleaned on a regular basis to ensure the correct operating environment is maintained.

“Safe operation of any railway also requires that a systematic approach is applied to the safety management of each system as well as the civil infrastructure, from concept through design, manufacturing, installation, testing, integration, commissioning and operation. In the case of a driverless railway, multiple dependable communications systems on trains and at stations fulfil a very important need to display information to passengers, make announcements, provide CCTV monitoring and give passengers the confidence that the control room staff can always be contacted in an emergency.”


In a challenging business environment, safety, risk and technical assurance is crucial

Our ethos is simple: loss prevention. We believe it is our responsibility to ensure that every one of our clients has the technical support and guidance needed to build and operate energy facilities safely and efficiently.

Wuxi Huaguang Boiler Co (WHBC) is an EPC (engineering, procurement and construction) company providing boiler design and manufacture up to complete power plant design, build and commissioning. Our Energy team in China provides inspection services to WHBC helping to ensure compliance with statutory regulations. The team also reports on progress of projects and supports the development of the client’s technical skills through training.


BUSINESS REVIEW | ENERGY

What we do

We are a leading independent provider of risk management services to the energy sector and work to help improve our clients’ quality, safety, environmental and business performance. Our technical experts and risk engineers evaluate the integrity of plant and processes, and focus on delivering practical advice. We give stakeholders confidence they are effectively addressing today’s economic, legislative and corporate responsibilities.

Where we do it

We deliver safety, risk and technical assurance across the energy supply chain and energy mix – from oil fields and pipelines to refineries, power stations and manufacturing. And our work is global; from inner city locations to projects in the harshest and most remote parts of the world.

How we do it

We have a profound understanding of the risks associated with energy exploration, production, storage, transportation and supply. We provide this expertise through a range of design appraisal, inspection and consultancy services to asset owners, manufacturers, operators and engineering procurement and construction contractors, particularly those responsible for assets which could pose a risk to people or the environment.


Industry overview

The growing need for energy will place unprecedented demands on technologists, power generation providers and engineering best practice.

Looking aheadHydrocarbons will continue to support economic development, but will be complemented by new forms of energy to help meet demand and contribute to reducing CO2 emissions. Getting the balance right between the cost and cleanliness of energy supply represents a huge challenge to an industry facing the growing threat of climate change.


When stable economic growth returns, energy demand will again begin to rise – especially in the developing world. As a consequence, energy-related CO2 emissions are set to increase by an average of 1% a year through to 2030. Balancing huge demand growth with the risk of greenhouse gas emissions is the major challenge of our time.

World energy consumption

Technologies and resources

INDUSTRY ISSUE 01

Keeping energy supplies reliableHydrocarbons currently provide 85% of the world’s energy, and are expected to remain the majority source for the foreseeable future. Renewables could make up 30% of global energy supply by 2050 – if hydroelectricity is included and assuming biofuels, wind and solar grow rapidly from their low base. Meeting tomorrow’s energy demands reliably and cleanly will require enormous capital investment, significant technological development, and clear and consistent policies.

INDUSTRY ISSUE 02

Delivering more sustainable energyNew approaches, based on decentralised, low-carbon and locally managed energy systems, are needed to support the development of sustainable energy generation and supply. Sweden has already decided to phase out oil in transport by 2020; ‘feed-in’ tariffs are under way in Germany and Spain; and France is committed to cutting CO2 emissions by 75% by 2050.

INDUSTRY ISSUE 03

Helping keep energy affordableEnergy supply increases need to keep pace with energy demand increases if prices are to remain affordable. Renewable technologies are developing rapidly, and, thanks to recent advances in drilling and production technology, tight gas, shale gas and coal bed methane have all become economically viable.

INDUSTRY ISSUE 04

Innovation in supplyNew and improved technologies will be critical to the production of sufficient energy to meet demand in the decades ahead. Already today’s largest wind turbines are almost 100 times more powerful than those installed in the mid 1980s. New challenges and changes in the energy sector’s structure are strengthening collaboration with universities on research initiatives.

1 Nuclear – 5%2 Renewables – 1%3 Hydro – 7%4 Natural gas – 24%5 Coal – 30%6 Oil – 34%

Data source: BP Statistical Review 2011 and Economist Intelligence Unit

13

4

5

62

CoalOilGasNuclearWindSolar

68%

44%

35%

14%

2.5% 2.4%

Data source: Economist Intelligence Unit

Fossil fuels account for nearly 90% of energy mix.

From a survey of 790 people around the world conducted by the Economist Intelligence Unit in September 2011.

Which energy sources will allow us to increase supply and reduce carbon emissions between 2031 and 2050?


Energy review

Our global team of technical experts have spent the last 12 months helping companies operate more efficiently, with increased confidence and, above all else, more safely. We use our independence, influence and technical expertise 365 days a year and 24 hours a day, to help clients meet their obligations.

During the past 12 months, we have reinforced our position in the energy industry as a result of robust growth in demand for our services, particularly from China and other non-OECD countries.

Our country teams across Asia have established a strong business in inspection and verification services, especially in relation to the burgeoning Sino-India trade where Chinese manufacturers are providing much of the supply chain for new power projects in India.

We have also taken opportunities to build on this by increasing the scope of consulting services through the Group.

We have merged our Australian risk consultancy operations into one company, LR Scandpower, which will help us to service the booming oil and gas markets of Western Australia. The move provides us with a tremendous resource in Australia and, when combined with the skills of our risk teams and Scandpower subsidiaries around the world, it offers industry a one-stop shop for turnkey expertise.

“ To provide effective technical assurance in the energy sector, operators need a deep knowledge of how people, plant and process interact – and the integrity to exercise clear judgement.”

John Wishart Energy Director

In April 2012, Lloyd’s Register acquired Houston-based WEST Engineering Services in a move that secures the Group’s position as the premier independent risk management organisation supporting the global offshore drilling industry. The acquisition of WEST – a specialist in subsea systems – further expands the global portfolio of technical services we can offer to the drilling sector, building on the support we already provide through ModuSpec, Lloyd’s Register ODS and Scandpower. WEST supports a shared ambition across all Group companies to make the drilling industry safer and more reliable.

Integrity at the heart of industry and community reputationOur through-life asset performance and process safety services are being used around the world by companies operating in the most challenging environments and under the most rigorous regulatory systems.

We are providing risk management services to Maersk Oil Group in Denmark and North Sea UK, supporting its global management of four key areas of operational risk. This illustrates our independence and how we can make a real difference across a wide portfolio of technical services and multiple geographical locations.

80%of global offshore rigs have been inspected by our ModuSpec business

2,988employees in the Energy business

200 per dayOur Scandpower business completes around 200 computational fluid dynamics simulations of fires and explosions every day


Drawing on our expertise, Scandpower has become the first foreign company to qualify to perform regulatory safety analyses for the Chinese offshore oil and gas industry. During 2012, we also developed an integrated health and safety management system for South African oil and gas business PetroSA, and were awarded pressure relief analysis work at BP’s Texas City facility in the US.

In Korea, Daewoo Shipbuilding and Marine Engineering awarded our team HSE (health, safety and environment) studies for three drillships designed to support ultra-deepwater drilling to 40,000 ft.

As global oil and gas reserves onshore and in shallow waters reduce, the upstream industry is increasingly turning to floating offshore installations (FOIs) for deepwater operations, and the market for these types of project is expected to grow significantly. The FOI sector will be key to the future success of our organisation and we are strengthening our teams to support international oil companies and offshore engineering contractors operating fabrication centres in Korea, China and Singapore. Our work on the Shell floating LNG facility already involves us in multiple projects ranging from classification of the vessel, to certification of equipment and validation of the vessel against performance standards.

Other significant developments in 2012 included the ModuSpec Centre of Excellence making formal recommendations to the oil and gas industry about how to assess hydraulic leaks in subsea equipment, and methodologies needed to safeguard operations when leaks occur.

Concerns about 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. During the year we certified Elia NV in Belgium after a rigorous process of assessment that covered its asset-management system that underpins Belgium’s 380 kV grid infrastructure.

Software to predict and manage riskThe traditional ‘stamp of regulatory approval’ remains the dominant compliance model for high-risk, asset-intensive industries. But Lloyd’s Register is going beyond basic compliance, to provide niche solutions which ensure that our clients’ integrity strategies are focused on operational and safety-critical areas.

Prelude FLNG

Floating liquefied natural gas (FLNG) is a revolutionary technology that will facilitate access to offshore gas fields that would otherwise be too costly or difficult to develop. FLNG facilities are amongst the biggest, most complex floating structures ever seen.

Shell’s Prelude FLNG is the world’s first such unit of this size, and will be installed approximately 475 kilometres north-east of Broome, Western Australia.

At 488 metres long, 74 metres wide and displacing around 600,000 tonnes of water, Prelude will be the largest floating offshore facility in the world. The substructure and topsides are being built and assembled at Samsung Heavy Industries’ Geoje Island shipyard in South Korea. The turret and mooring system, which holds the FLNG facility on location, was designed by Single Buoy Moorings in Monaco and is being built at Drydocks World Dubai.

The Prelude FLNG facility will produce around 5.3 million tonnes per annum (mtpa) of liquids, comprised of 3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of LPG. The facility will chill the gas to -162C, shrinking its volume by 600 times, so that it can be shipped around the world.

A consortium of Technip France and Samsung Heavy Industries, TSC, is managing the engineering, procurement, construction and installation of the FLNG facility. Lloyd’s Register is providing independent classification, certification and validation services, based in large part on Lloyd’s Register’s 2008 Floating Offshore Installations at a Fixed Location (FOIFL) Rules. Included in our services are inspections of more than 1,000 pieces of tagged equipment supplied by vendors located around the world.

Shell’s paramount focus is on safety, quality and process safety. Our services will help to assure that Prelude FLNG complies with the applicable regulations and rules at all engineering, procurement, construction and commissioning phases.

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TRAININGPreparing for thebig crew change

Approximately 48 offshore drilling rigs are expected to be delivered in 2012 from shipyards around the world. A further 64 rigs are due in 2013 and this growth is forecast to continue until at least 2015.

Based on a current active offshore fleet of about 860 drilling rigs, that is a growth rate of between 5% and 7%. However, with the expectation that 50% of today’s offshore oilfield workers will retire in the next 10 years (known in the industry as the big crew change), the question is: who is going to work on these rigs?

Drilling contractors are struggling to find competent personnel to operate the rigs coming out of the yards, resulting in significant salary inflation. Several drilling contractors have started programmes to recruit and develop people capable of working offshore.

After more than 25 years in the drilling industry, ModuSpec has a wealth of knowledge in drilling and well control equipment. That knowledge has been fed into a range of training programmes via the ModuSpec Academy, which form an essential part of the industry’s efforts to train the next generation of drilling experts.

In Singapore, for example, the ModuSpec Academy has set up a dedicated training facility equipped with a theory classroom and hands-on workshop where candidates can work on blowout preventers (BOPs).

One such area is blowout preventers (BOPs). These are critical parts of an offshore drilling rig’s safety system, and were thrust into the spotlight after the 2010 Macondo disaster in the US Gulf of Mexico. Today, we are working with leading owners and operators from the oil and gas industry to improve current methods of monitoring the performance of BOPs. Our risk management software enables the industry to identify their operational risk levels in real-time.

We have launched a new-generation, risk analysis tool called Explore – to optimise the design of safety systems used to manage the risks from fires and explosions associated with energy production – and also designed the first industry tool to help asset owners monitor rotating and instrumentation equipment. This groundbreaking reliability based mechanical integrity (RBMI) tool is already being used by Qatar Petroleum on all of its process plant, pipelines and offshore jacket structures.

As new and improved technologies will be critical to the production of sufficient energy supply, so will our development of risk management tools and software to enable clients to be smarter and more robust in managing risk and performance.

Training and the human factorWhile a key element of our work is understanding the risks surrounding physical assets, our world-class human factors team provides an intimate understanding of the increasingly important area of how people interact with those assets.

With ModuSpec’s specialised knowledge on drilling operations, the newly acquired WEST Engineering’s domain expertise in subsea applications, and our human factors expertise, we have been able to add value to the competence level of asset maintenance staff across the sector.

Our Scandpower team was even commissioned by the organising committee for the London Olympics to conduct a crowd modelling assessment of the hockey stadium.

We continue to invest heavily in training. Our ModuSpec business, for example, uses the knowledge it has gained from having carried out more than 6,500 rig inspections, to provide technical training days tailor-made for drilling personnel. The ModuSpec Academy now has seven of its training programmes accredited by the IADC Drilling Industry Training (DIT) accreditation scheme – and only six training providers worldwide conduct courses which are fully IADC accredited.

Our extensive experience as an Authorised Inspection Agency enables us to offer a wide range of American Society of Mechanical Engineers (ASME) training initiatives to meet client needs, particularly manufacturers of boilers and pressure vessels during fabrication.

During the past 12 months we have developed other tailor-made courses – from mechanical skills to HSE applications, as well as complete subsea training programmes.

We have also shared our knowledge on subjects ranging from corporate responsibility to climate change, and information technology to management systems. This was one reason why Scandpower was able to win our first nuclear consulting contract of its kind in India.

Experience in renewablesRenewables represent a potentially high-growth market in which we are playing an ever-greater role. In Northern Europe, for example, there is already 1.2GW of offshore wind capacity in operation with a further 40GW due on stream by 2020. To this market we are already bringing our extensive experience of the marine and upstream sectors, plus the specific expertise of Scandpower in risk and reliability analysis and Lloyd’s Register ODS in noise and vibration problem solving.

But with the development of increasingly complex wind turbine technologies the technical assurance needs of companies operating in the sector are growing. And we believe there are many similarities between offshore oil and

“ CNPE has very ambitious plans for developing nuclear power in China, and safety has always been the focus of all our activities. Scandpower is an internationally recognised leader in the area of nuclear safety, and as such is an ideal partner for our company.”

Ji Xing Vice-President, China Nuclear Power Engineering Company


gas projects and offshore renewables. Crew transfer to turbines, for example, can be a particularly dangerous activity, and we see an opportunity to improve safety in the offshore wind industry, especially for wind turbine installation vessels, workboats and cable layers.

We have successfully managed a number of projects with Centrica, RWE and Vattenfall, and our work with Arctic Wind A/S, the operator of the most northerly wind farm in the world, is one example where our risk analysis and emergency response expertise is being used.

An increasing global footprint in nuclear assuranceNuclear power is a key part of our energy sector operations and we have seen growth in our traditional inspection and certification services as well as our risk-based consulting activities. Scandpower’s RiskSpectrum software is already used by 50% of the world’s nuclear power plants, and there is significant potential to grow this further. Indeed, we are strategically positioned to support over 35 countries that are seeking nuclear capabilities.

Supported by our increasingly successful joint venture with Apave, we are well placed to provide the skills and expertise the nuclear sector needs. We are also considering how we can best support future integrity engineering work between both organisations across the wider energy market.

Our new agreement with Magnox Ltd is paving the way for the transfer of qualified personnel between our two organisations. New-build companies and the nuclear supply chain are anticipating an increased demand for people at a time when Magnox is entering a decommissioning programme that will affect many of its skilled staff. Our alliance will help to ensure that we have the safety engineers we need to support our clients’ global growth ambitions.

The global nuclear sector is presenting a number of new opportunities for us, including projects with the UK’s Office for Nuclear Regulation, and work to ensure Ukraine’s nuclear safety and environmental protection standards comply with those of the EU. Spanish company Felguera Caldereria Pesada S.A. (FCP) also became the first new ASME N-stamp holder to be issued by our company LR Insurance, Inc.

We played a lead role in the International Atomic Energy Agency’s (IAEA) seismic safety mission to the Onagawa nuclear power station in Japan, where we looked at how the plant’s structure, systems and safety components performed during 2011’s earthquake and tsunami. The findings of the research will be made available to IAEA member states to help in developing earthquake preparedness and response plans. As our primary role is the protection of life and the environment, we believe such international missions are important.

DONGKeeping the noise down

Early in 2012, Lloyd’s Register ODS was contracted by DONG Energy to investigate a pile driving operation at the Anholt wind farm in the Kattegat channel between Denmark and Sweden.

DONG were in the process of testing noise mitigation mechanisms, specifically relating to the driving of monopile foundations for offshore wind farms. This activity generates noise levels that can be harmful to marine mammals, and which could become subject to European Union (EU)-wide regulation. So far, only Germany has sanctioned legislation, however the remaining EU countries are expected to follow suit.

Our team investigated a series of underwater sound pressure and vibration measurements to help provide the necessary data for design evaluation and to support further product development.

As the focus on marine life sustainability increases, the maritime and offshore industries are likely to see a growing need for this type of underwater acoustics expertise, in which Lloyd’s Register ODS has over three decades of experience.

Project highlights 2010/11

• In China we were appointed by the Shanghai Electric Power Co Ltd (SEC) as the independent inspection agency for its newly built thermal power plant in Iraq.

• Our Rotterdam team won two contracts for work on the new Essent Claus C power plant at Maasbracht. These include notified body work on the piping, and design appraisal and inspection of the gas turbines. Lloyd’s Register will also act as the Authorised Inspection body during the station’s operation.

• We achieved approval as an Inspecting Authority by the Central Boiler Board (CBB) of India. We are the only organisation to operate in six states, and the only one which has CBB approval to work both within and outside India. So far, inspections of boilers and boiler components have been carried out for seven major projects.

• Alpha Ventus is Germany’s first offshore wind farm. Our Scandpower team carried out a risk assessment and RAM study (reliability, availability and maintainability) of the connection to the German grid, including assessing the offshore platform, the onshore substation and the cable that joins them.

• When Lloyd’s Register acquired WEST Engineering in April, the American company was working closely with Anadarko – as was ModuSpec, already a subsidiary of Lloyd’s Register. Our two businesses aligned their teams, and

Photograph courtesy of DONG Energy.



co-ordinated the project and technical support they were providing to Anadarko with the result that an initial contract, for the commissioning surveillance and acceptance testing of three drillships, has since grown to nine rigs with a further 15 expected next year.

• We were selected by several of India’s independent power producers to ensure the quality of equipment being manufactured for them in China to support the huge expansion of power capacity currently under way in India. Inspections have so far been completed on approximately 30GW of power plant.

• Suncor Energy operates the Terra Nova oil field off the coast of eastern Canada, using a floating production storage and offloading (FPSO) vessel, with special modifications to cope with the harsh weather environment. We have certified and classified the vessel and many of its onboard safety, environmental and subsea facilities. Terra Nova FPSO is now disconnected from the field and undergoing repair and modification work during the most extensive planned shutdown in its history.

• North Rankin A (NRA) in Western Australia is one of the world’s largest capacity gas production platforms. Its operator, Woodside, is undertaking a AU$5 billion redevelopment project that involves the refurbishment of NRA, in readiness for the installation of North Rankin B (NRB) alongside. We are providing validation services during design, procurement, fabrication, installation, hook-up and commissioning.

“ Thank you … for the effort that your team put forth to perform independent verification for Formosa facilities. I understand that it is not an easy task to properly evaluate a company’s performance in a short time frame… we ask for a fair and objective report that does recognise our effort and that provides concrete suggestion that will truly help us to improve.”

Susan Wang Vice Chairwoman of Formosa Plastic Group


The energy industry is a long-term enterprise, and decisions made today have consequences for years to come.

As the global energy industry continues to evolve, it will increasingly depend on standards and conformity assessments for assurance that equipment can fulfil specified requirements safely. Therefore we believe that the demand for health and safety and process safety services will increase, and that downtime prevention will be a key focus for all energy sectors.

Industry cannot escape the fact that new risks are emerging, and we have seen how disasters can change operating environments and the perception of risk oversight. Yet policymakers must not allow knee-jerk reactions to influence regulations. Good regulation is key to a smart energy policy and good regulation properly balances the interests of all stakeholders.

Our strategy has always been geared towards growth in terms of global reach, new product development and safe supply chain optimisation. We will continue to develop our capability to provide expert advice even in the most remote environments and across all areas of the energy mix.

India, China, the Malaysia-Singapore hub, the Middle East, East and West Africa, Brazil, Kazakhstan and Canada continue to be key focus areas for our business. Backed by a proactive budget for growth, we will further develop our global service platform, which will enable improved and effective cross-selling of our technical expertise anywhere in the world.

We will strengthen our delivery of the asset integrity management approach to operators involved in the very latest power generation projects both offshore and onshore, and in the care and maintenance of ageing assets operating beyond their original design life.

And we look forward to doing our part to contribute to the international dialogue about energy supply and demand issues, and to help guide our clients to make the sound decisions that will ensure a safe, reliable and sustainable future.

TheSingaporeconnection

Our Group Technology Centre in Singapore is an essential part of our future – forming an alliance between Lloyd’s Register, industry, government and academia. It represents a major milestone for the Group that will complement our research and development activities in Southampton.

While Southampton will predominantly focus on marine-related projects, Singapore will address the many technical and systemic challenges that face the energy sector, both offshore and on land.

Singapore is one of the leading centres for construction and conversion of floating offshore installations, such as deepwater drilling units, as well as floating production storage and offloading vessels. This is a booming industry which is important for growth, market share and applying our industry expertise.

Along with research activities funded by The Lloyd’s Register Educational Trust, our global technology centres will help to provide advanced technologies, systems and solutions to benefit industry and society.


LRQA’s approach to independent assessment and certification helps inspire stakeholder confidence and creates competitive advantage.

Robust assessment helps deliver tangible business benefits


BUSINESS REVIEW | MANAGEMENT SYSTEMS | LRQA

What we do

LRQA is the world’s leading provider of independent assessment services including certification, validation, verification and training across a broad spectrum of standards and schemes, with recognition from over 50 accreditation bodies. We introduced LRQA Business Assurance to the certification market in 2004. This initiative had significant influence across the industry, extending the focus beyond the certificate to an assessment approach linked to strategic objectives.

Where we do it

LRQA is a global organisation, working in over 120 countries, and able to provide co-ordinated services worldwide for multinational clients. We focus on local needs, meeting the specific requirements of all our clients, large and small, wherever they operate.

How we do it

Our unique assessment methodology – LRQA Business Assurance – helps you manage your systems and risks to improve and protect the current and future performance of your organisation. Our assessors possess deep technical insight so they understand the industries they work in and the businesses they assess. By connecting this knowledge to your systems and processes, we help ensure that your management systems are aligned with your strategic objectives.


INDUSTRY ISSUE 01

From compliance to performanceThe continuing global economic downturn has resulted in shifting the perception of management systems implementation and certification away from compliance ’because we have to have it‘ towards performance ’it is about tangible benefits and organisational competitive advantage’. While associated benefits from implementing management systems have been well documented, a key success criterion is not only adopting, but embedding them into an organisation’s strategic modus operandi to underpin organisational performance.

INDUSTRY ISSUE 02

ISO revisionsThe planned revisions to the ISO standards due in 2014–16, including the globally adopted quality management standard (QMS) ISO 9001 and environmental management standard (EMS) ISO 14001, will link our industry more closely to the performance of businesses worldwide. With agreement on the common structure and text for future revisions on all ISO management systems standards, this defines the need for an organisation to consider changes relative to both its external and internal environment. This will focus the organisation and its certification body on the alignment of its quality objectives within its overall strategic goals.

What is clear is that in order to remain the valuable business systems that they currently are, both ISO 9001 and ISO 14001 need to continue to evolve, ensuring that organisations of all sizes, complexities and location see a clear connection between their strategic objectives and their QMS and EMS. It is not just about meeting the requirements of a standard to get certification; it needs to be embedded in everything that the organisation does.

Looking aheadMarket perceptions are changing; robust and relevant services and products that inspire confidence and drive organisational resilience, competitive advantage and strategic growth are the real value in independent assessment. With that goal in mind, the certification industry – through innovation, independence, training and the technical expertise of assessors – represents a valuable service to the business world, both today and into the next evolutionary chapter of our future.

Industry overview

Two events are combining to make this period the most important in the history of the assessment and certification industry – the shift in perception of management systems and planned revisions to the ISO standards.

ISO 9001+ includes sector-specific schemes ISO/TS 16949 and ISO 13485

The demand for certification to ISO management system (MS) standards has grown consistently year on year, including strong growth throughout the economic downturn. Certification against ISO 9001, the world’s first and most widely implemented MS, has increased by almost 50% in the past six years, passing the ‘one million global certificates issued’ mark in 2008. According to data from the current ISO survey, ISO 14001 has grown even more rapidly, averaging almost 20% annual growth since 2005. The emergence of new standards and schemes, such as ISO 27001 (IT security), ISO 22000 (food safety) and ISO 50001 (energy management) have also contributed to a growing trend towards integrated systems. Organisations are able to better manage their risks through one system that takes into account all of the specific elements of each ISO standard. * As at 2 November 2012, the ISO certification statistics for 2011 have not been released.

ISO 14001ISO 9001+

111.1128.2

154.5188.8

223.1250.9

795.9

932.9999.6 1,035.3

1,122.41,172.6

2005 2006 2007 2008 2009 2010

Number of certificates issued, in thousands. Last six years of available statistics from ISO survey*

Quality/environment ISO certificates



Managment Systems review

LRQA performed well over the past financial year with a consistent level of demand for our services across our EMEA, Asia and Americas regions.

Our rate of getting and delivering new business significantly increased during 2011/12. In order to maintain an agile and sustainable business, we are focused on ensuring that we have the right people and the right approach.

We invest in our people to enable us to continue to meet the needs of our existing clients, as well as the rise in demand for services in the global marketplace. This approach means that we are able to recruit and keep a global assessor force that leads the industry in technical expertise and sector-specific experience. This is a clear competitive advantage in areas such as climate change and food safety, where the demand for added value assessment services is outpacing the qualified assessor pool.

Our unique approach to assessment and certification – LRQA Business Assurance – continues to evolve, enabling us to ensure that we are consistent in our delivery of responsible assessments and grading on a global basis, imperative given that our clients include some of the world’s most well-known brands with operations and supply chains across multiple regions.

We continue to develop our business to better serve our clients from both a people and IT infrastructure perspective. We are investing in new systems and processes to enable us to continue to keep one step ahead of the market. Not only will this improve the service to our clients, but it is an integral part of our brand identity as a technology-enabled organisation.

Adding value to society LRQA is proud to be recognised worldwide for its technical expertise and integrity. Our experts – along with some of our clients – are regularly invited to participate on national and international technical committees such as accreditation forums, standards committees and industry sector groups. The recent election of LRQA’s Managing Director, Mike James, as the new Chair of the Independent International Organisation for Certification (IIOC), the global certification trade body, demonstrates the mutual commitment of both parties to technical excellence and to shaping the future of independent assurance.

Energy management standardThe connection between organisational performance and independently certified management systems is best illustrated with ISO 50001 – the new international energy management standard (EnMS) – where increasingly demand is based on the need for internal improvements on efficiencies. As a consequence, organisations are seeing benefits through cost savings and securing their energy supply.

“ Our global assessor force leads the industry in technical expertise and sector-specific experience.”

Mike James Management Systems Director

£1m+ savings“LRQA’s Business Assurance approach to our management systems has helped Shanghai Waigaoqiao Shipbuilding to be a more integrated, safe, efficient and improving organisation. LRQA’s environmental insight has directly led to the identification of over 20 relevant clean production schemes, saving us over 13 million Chinese yuan (£1.27 million)”

Shanghai Waigaoqiao Shipbuilding Co.,Ltd.

153m tonnes CO2

In 2011, LRQA verified over 153 million tonnes of CO2 under the EU Emissions Trading Scheme, bringing our year-on-year total to 842 million tonnes of CO2

Industry leaderIn 2012, LRQA was appointed chair of the Independent International Organisation for Certification (IIOC), the global certification trade body. LRQA is renowned for our technical expertise and we are regularly invited to participate in accreditation forums, standards committees and industry sector groups to help shape the future of independent assurance


LRQA has experienced significant success with ISO 50001 over the past 12 months, with business wins across all of our regions. Our in-depth understanding of the energy sector has helped ensure that our EnMS assessment methodology is directly linked to our clients’ strategic energy objectives.

Food safetyLRQA has seen an increased appetite across the global food supply chain for integrated, transparent collaboration. The resulting increase in trust, brand reputation and consumer confidence will allow the market to focus on reducing the most important number of all, the 1.8 million people dying each year through food safety related issues. That is why the Global Food Safety Initiative (GFSI)-led harmonisation efforts of food safety standards and schemes – coupled with a collective focus on collaboration – is good for everyone; retailers, manufacturers, suppliers, certification bodies and, most importantly, consumers of food products.

Secondly, supply chain management is key to improving sustainability. FSSC 22000 – the GFSI accepted certification scheme and process-based approach to food safety – is widely used by food manufacturers and its uptake is growing rapidly around the globe. The days of a single snapshot-in-time checklist-style assessment is fading into the history books and is being replaced with dynamic process-based management systems audits. Delivered through auditor competency and sector-specific expertise, these audits focus on the systems and processes that strategically underpin organisations and their supply chains and it is this holistic approach that is gaining a foothold amongst retailers, manufacturers and suppliers.

Climate change and sustainabilityClimate change and sustainability services are a core element of our offer and a key strategic area for our business worldwide.

There have been several positive developments on the international climate change stage:

• developing countries such as China, India and Brazil committing to legally binding targets

• approval on the need for a ‘new market-based mechanism’ to support the Clean Development Mechanism (CDM) and Joint Implementation

• agreement on a second Kyoto commitment period

• the World Bank’s Carbon Initiative for Development (Ci-Dev) aimed at assisting developing nations to build carbon markets is already resulting in carbon market emergence in the 15 countries that have applied for funding.

The future for the climate change market in the longer term therefore looks bright. Through LRQA’s new ‘core verification approach’ developed during 2011, our processes facilitate an agile response to what is becoming a more fragmented emissions market. Evidence of this can be found in the Ci-Dev initiative, with our climate change experts being asked for their technical insight in helping to shape the development of regional emission trading schemes, specifically in China, the Republic of Kazakhstan and Mexico.

The LRQA Business Assurance approach of linking management systems to an organisation’s strategic objectives sits at the heart of our climate change offer and our work with Southern California Edison is illustrative of our ability to deliver services into a changing landscape.

ISO 50001 certification keeps Avnet Asiaon track

THE push towards energy efficiency at leading electronics company Avnet Asia was driven by a very pragmatic need to cut costs. As part of their energy management strategy, Avnet Asia was awarded certification to ISO 50001 by LRQA in June 2012.

While some companies might feel it is enough to simply practice good energy-saving habits without pursuing the certificate, Avnet Asia believes it helps to ensure that the company stays on track. When the company embarked on its energy programme, it planned to reduce its utilities bill by at least 23%. It has already met that target, and hopes to improve further.

“Energy saving is a continuous and long-term initiative that Avnet Asia is determined to achieve and maintain. With this certificate, Avnet Asia is even more committed to keeping up its efforts to continue the energy management programme, which also contributes to green ideology.” SS Teo, Avnet Asia Asia-Pacific Senior Director of Logistics Management

“ We chose LRQA because of the team’s expertise and because we wanted a systems approach to pre-assurance of our sustainability practices that would provide business value while addressing our challenges.”

Dr Jack Sahl Director of Environment & Resource Sustainability, Southern California Edison



In the shorter term, the existing markets of CDM, the EU Emissions Trading Scheme (ETS) and the voluntary standard ISO 14064 have remained good for verification bodies. The December 2012 deadline for CDM projects to become registered if their credits are to be accepted into the EU market has resulted in a surge in demand for our validation services throughout this year and a revenue increase in excess of 40%.

With climate change increasingly impacting upon the frequency and effects of extreme weather events and the availability and supply of materials and resources on a global scale, the need for organisations to adapt to these changes is of increasing importance to ensure their sustainability.

Services to marine sectorDuring 2012, we have seen a rise in cross-stream activity – particularly with our colleagues in the Group’s Marine business.

Using the technical expertise of LRQA, Lloyd’s Register developed a ‘marinised’ application of ISO 50001, with the first certificate being awarded to Maran Tankers. This joint initiative will help shipowners meet both environmental regulatory compliance and the need to reduce fuel consumption in line with the IMO’s 2013 Ship Energy Efficiency Management Plan (SEEMP) deadline.

In August 2012, Ambrey Risk, the international maritime security specialist, was the first to achieve certification to ISO 9001:2008 for the provision of maritime security services for vessels with LRQA.

These achievements demonstrate LRQA’s ability to build on Lloyd’s Register’s strong maritime credentials to deliver against our mission of enhancing the safety of life and property at sea.


The strategic role that management systems implementation and certification now holds for our clients and prospects translates into increased responsibility and opportunity for us globally.

As such, we need to continue to ensure that our approach and our people meet and exceed the expectations of our clients and the wider marketplace. We are confident that LRQA Business Assurance is the vehicle that will continue to enable us to add value not only to the many thousands of clients that we serve worldwide, but society at large.

Collaboration across theglobal food supply chain

During the 2012 GFSI Global Food Safety Conference, LRQA shared a stage with Mars, Wrigley and Cargill.

By sharing their collective insight, expertise and examples of best practice, these global food organisations demonstrated how their work with LRQA, through the linking of their unique supply chain requirements and our risk-based approach, is paving the way for excellence and delivering business benefits.

“For Mars, a Quality Management Programme compatible with the requirements set out in the GFSI recognised schemes offers us consistency and efficiency, which helps across the supply chain.” Cathy Stannard, Global Head of Quality & Food Safety Management of Mars, Incorporated.

Jennifer Yezak, Global Food Safety Manager, Wrigley, a subsidiary of Mars, Incorporated, made one of the key illustrative points of the session; “We saw a 25–50% reduction in retail audit requests once we went to FSSC 22000. So we’re saving time and the cost of audits thereby enabling our people to focus on getting the product right the first time.”

Roger Bont, Global Quality Assurance Director, Corporate Food Safety & Regulatory Affairs, Cargill, provided an impactful example of a collaborative approach to auditing. “In 2010, post the implementation of FSSC 22000, there was one third-party audit at our salt facility in Michigan – previously they had done 12 – and now they did just one. So not only did we save on cost, but with the time saved, our team in Michigan gave me a three-page list of food safety enhancements that they have completed in 2011. So benefits all round.”


Lloyd’s Register operates worldwide through a network of entities which deliver our services and products to our clients efficiently and effectively. These bodies support our mission to protect life and property and advance transportation and engineering education and research.

Safety oversight role on the new Aarhus Light Rail projectLloyd’s Register EMEA has been appointed as the independent safety assessor (ISA) for the new light-rail system approved for the city of Aarhus and surrounding districts. Aarhus is Denmark’s second largest city and is situated at the centre of the east Jutland region that has experienced a steadily rising population following a period of sustained economic growth which has more than doubled the number of journeys between Aarhus and its surrounding communities in recent years.

Ciner Ship Management transfer into LR class Established in 2010, as a new entrant into the shipping sector, Ciner Ship Management has been a target client for Lloyd’s Register so this was a significant first for our Turkish office. The transfer of class (ToC) includes four 82,000 dwt and four 63,000 dwt bulk carriers. The first, Artvin, was delivered in October 2011 at South Korea’s Hyundai Mipo Dockyard. The other seven ships which are being built at Korean and Chinese shipyards will be transferred to Lloyd’s Register on delivery by 2013.

LRQA, Inc. certifies OCLC to ISO 27001OCLC achieved ISO certification for information security management, recognition that provides several benefits including compliance with various privacy frameworks, improved security, clearer definition of security roles and standardised quality procedures. Founded in the US in 1967, OCLC is a non-profit, membership, computer library service and research organisation dedicated to the public purposes of furthering access to the world’s information and reducing library costs.

India’s Reltech Consulting joins GroupIn July 2012, we acquired the business and principal assets of the Mumbai-based nuclear risk specialists, Reltech Consulting (Reltech), in a move designed to further strengthen our historic presence in the Indian energy sector. The business and assets of Reltech, which provides safety management services to a multinational civil nuclear client base, have been transferred to the newly formed LR Scandpower Risk Consultancy Pvt. Ltd., completing another major step in the strategic expansion of our global nuclear business.

Our global operations are divided into three geographical areas: Americas; Asia; and Europe, the Middle East and Africa (EMEA).


BUSINESS REVIEW | AROUND THE WORLD

Europe, Middle East and Africa

The region has embraced the challenges of the ongoing political and economic uncertainty and turned them into new opportunities.

Paul Graaf Director, Lloyd’s Register EMEA

In the Europe, Middle East and Africa region we have 3,800 employees spread across 46 countries that cover a wide range of cultures and economies. Geographically, the region stretches from West Africa to Russia. The region has embraced the challenges of the ongoing political and economic uncertainty and turned them into new opportunities. Income fell by 0.5% year on year, as growth in Northern Europe almost fully offset the contraction experienced in Southern Europe.

The euro crisis has dominated the newspaper headlines over the past 12 months. The significant sovereign debt of many European countries has resulted in austerity budgets that have cut or delayed spending, particularly on capital-intensive infrastructure projects. While this had an impact on our businesses in these countries, we have won significant new business from infrastructure projects in the United Arab Emirates, Qatar and the Kingdom of Saudi Arabia.

In the marine sector, confidence remains low in our core markets. Developments in the political situation in Greece and its potential implications on the eurozone going forward have delayed shipowners’ decisions to invest in newbuildings, however the outlook is more optimistic now, with overall confidence in the shipping industry rising. We have seen strong growth in the energy sector in Northern Europe and steady growth in our Transportation and Management Systems businesses.

The Arab Spring that began in early 2011 continues to affect our business. Our primary focus is on keeping our people safe and we have been working closely with our offices in each of the affected areas to monitor the situation in each country and, where necessary, evacuate our employees.

Following the evacuation of our staff from Libya we are closely monitoring the security situation in the country for signs that it safe to resume operations. Similarly, the ongoing political uncertainty in Egypt, following the uprising, has resulted in economic stagnation. We are also monitoring the political situation in Pakistan – while we continue to do business, we are restricting travel to and from the country.

The EU’s and US’s increasing force of sanctions against Iran meant that it was no longer viable for Lloyd’s Register to operate in the country. As result, the operations in Iran were ceased in March 2012.

We continue to focus heavily on ensuring the safety of our employees. The region is preparing for OSHAS 18001 with initial audits completed successfully. Our lost time incident frequency rate continues to be very low; however, we are striving to improve this further. The coming year will also see the region completing accreditation to the environmental standard ISO 14001, the final stage of full accreditation for Lloyd’s Register.1 Marine 41%

2 Energy 27%3 LRQA 24%4 Transportation 8%

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1 UK & Eire 27% 2 Western Europe 22% 3 Greece & East Med 12% 4 Central Europe 12%

5 Southern Europe 9% 6 Nordic Area 9% 7 ME & Africa 8% 8 Lloyd’s Register ODS 1%

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Revenue by business 2011/12

Revenue by area 2011/12




Paul Huber President, Lloyd’s Register Americas, Inc.

Through several acquisitions, as well as organic growth, we have strived to diversify our business, improve our value proposition and create new opportunities through increased synergies between our businesses. In April 2012, we continued our growth strategy with the acquisition of Houston-based WEST Engineering Services.

As a result of the acquisition, we increased our employee headcount by 240 to a total of 987 and, if annualised, realised a revenue growth of 74.6%.

With the added strength of our new colleagues at WEST, we have moved forward with a business plan to expand our operations in Brazil and are continuing to build our FOI capability. We expect to see significant growth over the next three to five years as WEST Engineering Services and ModuSpec integrate to become the top independent provider of technical services to the offshore drilling sector.

Other Energy highlights include a major shift in the Gulf of Mexico, post-Macondo, towards a goal-setting or performance-based, operating environment. Our SEMS (safety and environmental management system)- related products are attracting widespread recognition and demand in this sector.

In the area of asset integrity, Lloyd’s Register Energy Americas (LREA) released the first reliability based integrity (RBI) software designed to address the maintenance needs of rotating and instrumentation equipment. Adding this to our already robust RBMI (reliability based mechanical integrity) suite of asset integrity tools has proven a market leader in the downstream petro-chemical market sector.

Within the Marine business, a series of diverse and welcome successes have been experienced in the USA with new construction, transfer of class (ToC) and consulting. Despite the depressed marine

market, growth for ToC’s included a positive seven vessels. Expert consulting services for leading clients continue to expand as well. One of our largest client collaborations resulted in a partnership with a major cruise line to conduct an assessment of the effectiveness of their emergency operations training. The two-phase project also highlighted the human factors resources available within Lloyd’s Register to complete the work.

In Canada, the Marine business was highlighted by decisions and investments to revitalise and recapitalise fleet assets, both private and public. For Brazil, current investments in oil and gas offshore exploration have created a major revamp for the shipbuilding industry. Lloyd’s Register has maintained its privileged position in the Brazilian shipbuilding market, positioned at the top for merchant ships, including oil tankers, and for offshore support vessels. In addition, we continue to hold an excellent position with newly established shipyards and with traditional existing shipbuilders in the country.

Across the Americas Management Systems business, we continue to experience significant growth, driven principally from new business in the US, Brazil, Mexico and Chile. Over the past year in particular, we have made significant investments in our Brazilian business to allow us to deliver long-term sustainable growth in this country to take advantage of emerging market opportunities. We expect to continue to see growth across the Americas within the food sector as a result of our commitment to the fast-growing FSSC 22000 scheme and our strong collaboration with the Global Food Safety Initiative (GFSI). In addition, we expect to continue our growth trend in the aerospace sector.

Americas

Growth has been a key strategic focus for the Americas over the past few years.

1 Marine 35%2 LRQA 22%3 Energy 43%

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1 USA 64%2 Canada 16%3 Brazil 7%

4 Mexico 4%5 Other Latin America 9%


BUSINESS REVIEW | AROUND THE WORLD


1 Marine 58%2 Energy 22%3 LRQA 16%4 Transportation 4%


1 North East Asia 37%2 Greater China 34%3 South East Asia 14%

4 Australasia 9%5 South West Asia 6%

John Rowley President, Lloyd’s Register Asia

The Asia Pacific region achieved 7% growth on top of the 13% in 2010/11. This has been delivered in combination with further organisational development and efficiency improvements to support future profitable sustainable growth, which has led to our employee total rising 5% to surpass 2,100.

The bulk of the growth was provided through our Transportation and Energy businesses, growing 23% and 22% respectively, while the Marine and LRQA divisions each grew 4%.

The Transportation business has capitalised on its excellent brand equity in China by winning significant independent safety assessment work in the rapidly expanding subway networks across the country. The business has also continued to thrive in its other key Asian market, South Korea, and performed a preliminary market assessment of India for potential future entry.

Our Energy business also had a strong year, with double-digit growth in all its key market sectors. A highlight of the year was the successful delivery of a major independent verification and validation project for a prominent petrochemical facility in Taiwan, which required expert resources from Australia, Korea, China, Malaysia and US. In addition, the Australasian and South East Asian teams have been strengthened to ensure seamless delivery of services to the oil and gas sector, and we have further improved our Korean capabilities to support the shipyards with their floating offshore installation (FOI) newbuilding programmes.

Power generation continues to be a challenge in Asian countries due to a combination of industrialisation, wealth generation and urbanisation which, with pressure to reduce carbon emissions, is leading to a shifting of the energy mix towards the nuclear option. For example, in China and India alone there are at least 50 nuclear reactors currently under construction or planned, while Vietnam, Indonesia and Thailand are all considering nuclear power. The business improved its presence in this market through co-hosting a successful conference in China together with the Chinese government, and also finalising the acquisition of Reltech Consulting, a Mumbai-based nuclear risk services business.

LRQA in Asia Pacific initially suffered from the after-effects of the terrible tsunami which hit Japan in March 2011. The effects on the local manufacturing industry, and the supply chain in general, lasted many months. However, the business throughout the region recovered well by delivering exceptional customer service and driving new products and services such as climate change certification, security and energy management systems.

The global food supply chain is under increasing stress with world population set to rise to nine billion by 2050, and food production expected to swell 70% in that time, led by meat protein intake. This shift in diet is particularly relevant in the Asia region, driven by a combination of urbanisation as well as improvements in per capita wealth and GDP distribution. This shift comes at a time of global food price rises. LRQA has responded by increasing its food certification capabilities, notably in China, to help improve food safety and supply chain efficiency.

The shipping market is in the midst of a well-documented global slump from which Asia, home to 90% of the world’s shipbuilding capacity, is not immune. However, our Marine sales and service teams remained focused on winning a high proportion of the available newbuilding work as well as delivering exceptional service to existing customers. This, together with focusing on new services such as type approval and naval work, led to our Marine business delivering a solid year.

We continue to help our customers achieve their aims safely through working together to deliver exceptional service with leading-edge technology. To this end, we are collaborating with the Singapore government’s Agency for Science, Technology and Research (A*STAR) to set up a Group Technology Centre, to be opened in early 2013, which will focus on delivering innovation and long-term solutions to the energy and marine supply chains.

Asia

The Asia Pacific region has had another successful year despite the well-documented economic challenges.

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Alastair S Marsh Chief Financial Officer

The Group has generated organic income and operating margin growth despite tough market conditions.

I would like to comment on selected key numbers from the Group’s annual report and financial statements for the year ending 30 June 2012.

In 2012 Lloyd’s Register delivered a record level of income, continuing the trend of sustained growth for yet another year. In this review I will highlight key performance measures for the last six years to put this result into context.

IncomeTotal Group income for the year was £893 million, an increase of 4% on the previous year including £8 million of income from WEST Engineering which was acquired on 30 April 2012. Organic revenue growth was 3% for the period. Given the tough trading conditions, it is pleasing to report continued growth across the key areas of the business.

The Group has continued to benefit from maintaining a diversified portfolio of businesses. Over the six-year period annual income growth has averaged 12%. Despite the continued pressures on global freight rates and a decline in available work from new orders, our Marine business continued to grow. The Energy business has led our year-on-year growth; increased activity in the global energy market has driven demand for our services. Energy now represents almost a third of the Lloyd’s Register Group income.

Operating surplusOur reported operating surplus of £72 million represents a £32 million increase on the prior year. Approximately £10 million of this increase was due to a reduced foreign exchange loss this year compared to 2010/11. The Group has continued to manage effectively the cost base of the business whilst at an operating level, tight control of working capital has minimised the impact of the problems in the eurozone.

£893mTotal Group income for the year was £893 million, an increase of 4% on the previous year

£85mThe average annual growth in our normalised operating surplus over the last six years was 8%

7,885The average headcount for 2011/12 was approximately 7,900 employees, 4% higher than the previous year

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594

820 806855 893

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5752

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Normalised operating surplus£m

Income£m


ChIef fINANCIAL OffICeR’S RepORt

Excluding charitable donations, foreign exchange, and pension costs, the average annual growth in our normalised operating surplus over the last six years was 8%. These items are excluded to show the trend in profitability of the underlying operations of the business. This has been achieved over a period in which we have experienced high levels of uncertainty in the eurozone, and a significant slowing up of economic growth in the West.

Surplus before taxThe Group has reported a surplus before tax of £82 million for the year (£54 million in 2011). The amount in 2011 was net of a £10 million donation to The Lloyd’s Register Educational Trust, historically one of the ways in which the Group has fulfilled its charitable objectives. In 2011/12, no donation was made to the Trust pending the establishment of a new registered charity, the Lloyd’s Register Foundation, as the ultimate parent of the Group. In September 2012, Lloyd’s Register Group Limited transferred £200 million of its investment assets to the new parent company. We believe that, longer term, this change in structure will increase the amount which the new parent company will have available for charitable purposes.

The Group’s surplus before tax has also benefited from another year of steady investment returns. However, the turmoil in the world’s financial markets caused net investment returns for the year to decrease by 23% to £17 million compared to the prior year due principally to the falls in global equity markets.

Operating cash flowThe operating cash flow for the year was £66 million. Increased income and further improvements in working capital levels ensured a positive cash flow for the fourth year in a row.

The most significant of the non-operating cash flows during the year was the Group’s acquisition of WEST Engineering Group in April.

headcountThe average headcount for 2011/12 was approximately 7,900 employees, 4% higher than the previous year reflecting the growth in our business and the impact of those employees who joined us through the acquisition of WEST Engineering Group. The average headcount growth over the previous six years has been 6%. Year on year the average headcount has increased in line with income, maintaining income per employee at £113,000 for 2011/12.

ConclusionGiven the challenging market conditions prevalent throughout the year the Group’s achievement of organic income and operating profit growth represents a very positive result. It is also pleasing to report that the Group has increased its operating profit against the prior year, which underpins our ability to support our charitable activities. Although we expect the challenging market conditions faced by our businesses to continue; we are well placed to strengthen our position in our chosen markets and continue to deliver further organic and inorganic growth in the future.

Alastair S Marsh Chief Financial Officer

5,937

6,9767,398 7,549 7,555

7,885

06/07 07/08 08/09 09/10 10/11 11/12

34

-72

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102

7666

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84 85

111 107113 113

06/07 07/08 08/09 09/10 10/11 11/12

Operating cash flow£m

headcount Income per employee£000


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 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, elected by the Lloyd’s Register Foundation, are:

1 thomas thune Andersen Chairman

2 John D Chandris Senior Non-Executive Director

3 Ron henderson Non-Executive Director

4 Alastair Marsh Finance Director

5 Richard Sadler Chief Executive

executive Leadership teamThe 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:

6 Richard Sadler Chief Executive Officer and Executive Director, Lloyd’s Register Group Limited

7 Alastair Marsh Group Finance Director and Executive Director, Lloyd’s Register Group Limited

8 tom Boardley Marine Director

9 Mike James Management Systems Director

10 John Stansfeld Transportation Director & Group HR Director

11 John Wishart Energy Director

12 paul Graaf Director, Lloyd’s Register EMEA

13 paul huber President, Lloyd’s Register Americas, Inc.

14 John Rowley President, Lloyd’s Register Asia

15 estelle Clark Group Business Assurance Director

16 Chris Coupland Group Chief Information Officer

17 Jim harrison Group Legal Director

18 Keith povey Group Corporate Secretary

19 Mark Stokes Group Communications Director

20 John Wilford Group Corporate Development Director

21 Weijie Gao China Operations Chairman

Board of Directors

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BOARD Of DIReCtORS AND exeCutIve LeADeRShIp teAM

executive Leadership team

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Our mission: protecting life and property

The objectives of Lloyd’s Register are to protect life and property and to advance education and research in transport and engineering.

We do this by reinvesting our profits in charitable causes that support our mission; in developing new products and services to benefit the sectors we serve; and in public education, research and development. Our largest donations are made each year to The Lloyd’s Register Educational Trust (The LRET) which is an independent charity. To date, The LRET has received more than £55 million from Lloyd’s Register, and details of how it distributes its funding are on page 56.

Our day-to-day work helps to ensure that our clients’ assets and processes are safe, responsible and sustainable. 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.

Rules and regulations for safety One of the most important ways in which Lloyd’s Register benefits society is through its classification Rules and Regulations (the Rules). These set standards for the design, construction and lifetime maintenance of critical infrastructure ranging from ships to offshore units and some land-based installations. We work closely with the International Maritime Organization and other leading classification societies to develop better technical standards and regulatory support for the safety of shipping.

Each year we invest in the Rules to ensure that they are always up to date, and we use our extensive knowledge and expertise in the transport and energy sectors to introduce new Rules when new technologies are developed. This helps our clients to continue to innovate safely.

Developments this year included the publication of our first dedicated set of Rules for stern-first ice-class ships. These answer the demand for technical support as the industry continues to explore the potential of polar transportation routes and the new energy reserves in the far north. The development of the new Rules were supported and validated by leading ice-class tanker designers, key regulators and operators.

To ensure that Lloyd’s Register remains at the forefront of technological developments while having access to leading-edge research and development facilities, the Group has invested in a new Group Technology Centre located on the University of Southampton’s campus. By the time the new facility opens in 2014, around 350 of our marine specialists will have relocated to Southampton from our London office. This is an exciting development for the Group, allowing us to align even more closely with one of the world’s leading maritime universities. This move has been followed by the creation of a second Group Technology Centre in Singapore, which will focus initially on solutions for the many technical and systemic challenges that face the energy sector, both offshore and on land.

These two centres, together with the research activities commissioned by The LRET, will serve as the cornerstones of our global research and development network. They will help us to provide the advanced technologies, systems and solutions that society will need to promote safety in an increasingly complex world.

New products and servicesIn order to help improve the safety and operation of our clients’ assets, we continue to develop new products, services and software packages – as well as expanding the use of existing products for additional safety-related purposes.

Scandpower and ModuSpec, for example, are working with leading owners and operators in the oil and gas industry to improve current methods of monitoring the performance of blowout preventers (BOPs). Our BOP Risk Model is expected to improve significantly the current process of assessing risk during operations. This is a new application for existing Scandpower proprietary software which is already used by half of the world’s nuclear power stations to help them operate safely.

As the oil and gas sector moves into deeper waters, field developments and the equipment used are becoming more complex. Another proprietary Scandpower product, its new ‘Explore’ software, will

bring about a greater appreciation of the risks associated with using equipment in high stress, critical applications. It also supports the understanding of safe working practices before potential threats of equipment overload lead to accidents, and potential damage to the environment and local communities.

In the rail sector, our Transportation team has worked with a UK freight wagon supplier to design a prototype wagon designed to carry 40 ft (or two 20 ft) shipping containers. Other container platforms on the network tend to be around 60 ft in length and, given the industry’s preference for 40 ft containers, this means that part of the platform is left unused. When a train is travelling at speed, this can increase drag and fuel consumption. With the forecasted increase in freight movements between now and 2050, changes to design like this may have a significant impact on energy efficiency and environmental benefits.

Public education In addition to our funding of The LRET, we contribute to public education by ensuring that our research is made available to everyone, and that our highly qualified staff share their knowledge with academics, students, regulators and professionals through committees, conferences and publications.

Our London library is one of the foremost centres of its type in the UK, offering resources freely to those wanting to undertake research. In 2011, Lloyd’s Register took delivery of the Institute of Marine Engineering, Science and Technology’s (IMarEST) library, giving the collection a secure new home and assuring its preservation for the future. The historically important IMarEST collection consists of more than 390 linear metres of publications. The gift doubled the size of our library and historical archives open to the public. Joined together, the library is one the great resources still available for current and historic information concerning maritime history, marine engineering, naval architecture, offshore engineering and ocean technology.


PUBLIC BENEFIT

Looking forward

As described on page 12, on 2 July 2012, a new parent entity for the Group was established, Lloyd’s Register Foundation, a UK registered charity. At the same time our operating entity, now called Lloyd’s Register Group Limited, converted to a company limited by shares, with all shares held by the Lloyd’s Register Foundation.

One of the reasons for this change was so that the Lloyd’s Register Foundation could focus on fulfilling its public benefit requirements while making the best use of its available resources, which include its shareholding in Lloyd’s Register Group Limited. We believe that this additional focus will mean that Lloyd’s Register’s contribution to public benefit will continue to grow in the years to come.

Our work helps to protect the environment

In March, a four-man team from Lloyd’s Register joined technical experts and eco-entrepreneurs as part of the International Antarctic Expedition 2012, led by Robert Swan, OBE. Our team worked on renewable energy and environmental projects. Swan’s organisation, 2041, so named for the year that the Protocol on Environmental Protection to the Antarctic Treaty will expire, is dedicated to the protection of what he calls ‘the world’s last great wilderness’.

Sea trials of algae-derived biodiesel are part of a groundbreaking fuels initiative by Lloyd’s Register. One of the unique qualities of algae, which are plant-like organisms that grow in water, is that they can produce oils with molecular structures similar to petrol and refined hydrocarbon – which means they can help make gasoline, diesel and jet fuels. Other fuels being studied include methanol and dimethylene (DME) which are derived from hydrocarbon feedstocks but are potentially capable of carbon neutral production using biofeedstocks.


“ The LRET has distributed more than £26 million in grants and has commitments of £19 million for future projects.”

Michael Franklin Director, The LRET, reports on the highlights of the year.

The Lloyd’s Register Educational Trust

The Lloyd’s Register Educational Trust funds education, training and research programmes in transportation, science, engineering and technology, worldwide for the benefit of all.

Vocational training and professional development: Confidential Hazardous Incident Reporting Programme (CHIRP), UK; Maritime London Officer Cadet Scheme, UK; Nautical Institute, UK.

Research: Seoul National University, South Korea; Pusan National University, South Korea.

Highlights of the year

The LRET Research Collegium Twenty-five young PhD and post-doctorate researchers, representing 11 countries and 15 nationalities, took part in the second LRET Research Collegium held at the UK’s University of Southampton from July to September 2012. The theme was sea-bed exploitation.

Over eight weeks, they investigated the key issues, supported by lectures from academics and industrialists. Working in teams of five, each group published an academic book, a paper for a peer-reviewed journal, and a short film aimed at the general public. Each team then presented their findings to a panel of experts, who selected a winner.

Five members from the 2011 collegium were invited to attend the end of the 2012 collegium, and we hope that all scholars from each year will form an international network of future leaders in their chosen fields.

The Lloyd’s Register Educational Trust (The LRET) is an independent charity that has been funding education, training and research programmes since 2004. Our income – some £10 million in 2011 – is derived entirely from Lloyd’s Register, though only our own Board of Trustees can decide how the money is spent. We fund programmes in transportation, science, engineering, technology and safety, and have so far distributed more than £26 million in grants, £6.3 million in 2011, and have commitments totalling £19 million.

The grants are split between four categories:

Pre-university education – aimed at inspiring the next generation of engineers, scientists and technologists.

University education – nurturing exceptional scholars at undergraduate and masters level by funding tuition and academic fees.

Vocational training and professional development – funding organisations that provide training, knowledge sharing and skills development opportunities to people in work.

Research – adding value to society through fundamental research programmes.

Funding is allocated in a ratio agreed by the Trustees. Most funding goes on fundamental research programmes undertaken by universities around the world.

Awards in 2011/12

In 2011/12, The LRET made the following awards:

Pre-university education: Commonwealth Scientific and Industrial Research Organisation (Science by email), Australia; Engineering Development Trust (Go4SET and Open Industry), UK; Scottish Council for Development and Industry (Young Scientists and Engineers Clubs, Scotland), UK; Young Engineers (Young Engineers Clubs, England and Wales), UK.

University education: Admiral Makarov State Maritime Academy, Russia; EMSHIP, Belgium; Kazakh British Technical University, Kazakhstan; Nanyang Technological University, Singapore; European Science, Engineering and Technical (SET) Awards, UK; Union of Greek Shipowners, Greece; University of Southampton Malaysia Campus, Malaysia; University of Strathclyde, UK; World Maritime University, Sweden.


PUBLIC BENEFIT

The third collegium will be held from July to September 2013, the theme being coastal eco-cities.

A proactive approach to research This year we decided to take a proactive and structured approach to research funding, to ensure that money is spent in areas we consider to be significant priorities for public benefit. We identified four such areas as having the potential to deliver solutions to challenges of global significance:

• non-carbon energy sources and energy distribution

• understanding environmental changes and environmental improvement measures

• exploitation of harsh environments

• water and food supply sustainability.

In June 2012, we invited 70 universities worldwide to submit initial proposals for the funding of programmes, and specifically encouraged collaborative submissions.

Out of 29 expressions of interest received, we have selected five, involving 19 universities, to submit formal funding bids. Those that are successful will commence research in mid/late 2013.

Depending on the outcome, we may adopt this approach for research funding beyond 2013.

Royal National Lifeboat Institution (RNLI) and Arkwright Scholarships Trust, UK Each year, The LRET supports 10 Arkwright Engineering Scholars through their sixth-form studies as part of our pre-university funding. One of the 2010/11 group, Sam Wheelhouse, decided to work on a man-overboard detection system for his design

and technology A-level project and asked us for advice on testing the system. As we also support the RNLI’s sea survival training through our vocational training and professional development programme, we thought they may like to work together. Peter Bradley, RNLI Staff Officer Operations, mentored Sam through the development of his design.

After his A-levels, Sam was invited to the RNLI Training College to present his system. Peter said: “This is an incredible development for an A-level project.” Michael Vlasto OBE, RNLI Operations Director added: “I have no doubts that we will hear more as Sam progresses through life. It’s great that The LRET has invested in him and others like him.”

Dr Martin Thomas, National Director of the Arkwright Scholarships Trust who attended Sam’s presentation, commented: “This is an excellent example of how Arkwright, one of our sponsors and a host organisation, can help a dynamic young person really deliver some exciting engineering.”

University of Edinburgh, UK For the second year running The LRET funded a global technical leadership seminar on fire safety engineering at Edinburgh University.

The university is a world leader in addressing the lack of formal training in fire safety engineering among people who design our built environment. Fire safety design is often out of date, as although engineers use modern construction techniques and materials, safety rules are based on much older buildings.

During the six-day seminar, delegates from fire safety consulting and insurance backgrounds, from architecture and the fire services, government and regulatory agencies, considered case studies of different aspects of infrastructure design.

The aim of the seminar was to help enhance the safety of life and property by creating a generation of technical leaders who can effect industry changes worldwide as part of an international network.

Dr Guillermo Rein of Imperial College London, said: “I learned more about the strengths and limitations of this field in one week than in the previous six years.”

Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia Science by Email (SbE) is a scheme run by Australia’s national science agency, CSIRO, to communicate the value of science to children aged nine to 13 – as well as to their parents and teachers.

SbE, which includes science news, facts, and safe and simple experiments using household articles, is emailed to over 42,000 subscribers each week. It is an immediate, accessible and fun way of engaging young people with science and sustaining their interest with new information.

Although this is different from the sort of schemes we usually support, we are particularly pleased to be funding pre-university work outside the UK. SbE encourages hands-on learning and supports practical activities. An online tool such as this is also important in reaching remoter regions of Australia.


The Group relies on the expertise, talent and dedication of our global workforce to meet the challenges of today and the future. So the health and safety and development of our employees are key areas of concern.

Health and safety progress

Life matters. It is at the core of our business. And it is as important that we focus on our staff as on our clients; our people face similar hazards.

2011/12 was another positive year. We cut our lost time incident rate by 16% on the 2011 figure, down to 0.31 per 200,000 worked hours. This means that over the past three years since we started to overhaul our approach to our own safety, we have achieved a 56% reduction in lost time injury incidents. We have also significantly reduced the severity of the incidents that have occurred.

These achievements are the result of improved controls, training and awareness programmes, better personal protective equipment and safer cars.

We have also continued to encourage near-miss reporting (where one of our employees is nearly injured) and safety observations (where an unsafe act or condition is seen that does not pose an immediate threat to our employees). This has resulted in an increase in the reporting rate of these incidents 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.

Over the past year we have:

• completed the development of a new OHSAS 18001-compliant safety management system (SMS), and implemented it on a global basis

• rolled out a new suite of safety training and engaged with managers to ensure they fully understand their role in safety leadership

• implemented a global travel support service

• improved our crisis response capability.

Our SMS was completed and fully complied with a stage one assessment. We also put up a pilot country from each region for a stage two assessment to confirm that the system was being implemented properly. The result of this was that all three countries were recommended for certification.

In support of the SMS we have rolled out new safety training courses worldwide. These have included a DVD on how to conduct boat transfers safely, which contains film of our employee undertaking a transfer from a launch to a ship. The DVD was produced in-house because suitable material was not available commercially.

Another new training course is designed to help coach senior managers in behavioural safety and safety leadership. This uses a safety culture maturity model as a basis for understanding our current safety culture and to help shape local initiatives to improve our safety culture further. The behavioural elements focus on how to intervene and give feedback on both good and less good safety behaviours.

A travel tracking and medical and security support system has now been implemented for employees in most locations worldwide, to provide automatic travel advisory information specific to the country being visited.

This service forms one part of our preparation for crisis situations. We have learned a lot from the events of the Arab Spring, having had to evacuate personnel from both Libya and Bahrain. Our new crisis response process focuses on stabilising a situation to address any imminent threat to the life or health of our employees, to a point where business continuity plans can then be activated.

OUR EMPLOYEES


People policy and management

Our sound, progressive and effective HR policies make a positive contribution to the Group’s performance as well as helping to attract, develop, reward and retain employees of the calibre required to drive our business strategy.

Recruitment With the Group’s current focus on business growth, the global recruitment team has been working on developing a consistent process for delivering the right number of new recruits every month to meet the planned need. This is based on a vision of ‘one voice one opportunity’, which concentrates on how we attract talent and then manage it across the Group.

Our new employer value proposition concentrates on where Lloyd’s Register is heading. It illustrates the benefits of a career in the Group and why good candidates should join us.

We have developed a ‘go to market’ proposition which includes a new look and feel and tone of voice, working through job boards, blogs and social media.

By using broad channels to market and having a global view on requirements, the direct sourcing of candidates is delivering significant savings each month and has increased the number of hires, particularly in Energy and Transportation.

In February 2012, our Energy business started to recruit graduates and interns, attracting applications from a wide range of engineering disciplines and locations worldwide. Eleven interns completed the summer training programme – which received positive feedback from all concerned – and eight graduates began the training and job rotation scheme in September. By the end of the scheme each graduate should have gained the skills necessary to make them widely employable within Energy.

Developing our employees and our organisationWe have continued to develop Lloyd’s Register’s leadership capabilities, with the majority of our senior leaders having now attended the Essential Leadership programme, and over 300 managers completing ‘Managing in LR – Our People’. Both programmes continue to receive very positive feedback – as was shown in the last employee opinion survey and subsequent 360-degree evaluations.

The Powerof You

The Power of You employee recognition scheme was launched in March 2011 to reward the commitment, effort and achievements of our employees throughout the Group. All employees are eligible and anyone can nominate anybody else.

Winners are chosen for personifying our core values while ‘doing something that matters’. The values state that employees are to be: trustworthy; accountable; courageous; open-minded; and spirited.

This year’s gold award-winners were announced in September 2012, with each one receiving a £1,000 donation to their favourite charity.

Roberto Morand who is based in Rio de Janeiro, suffered an electric shock on a client’s site and stood up for what he believed in and shut the site down. He set things in motion so that this hazard was removed and similar potential risks avoided.

In South East Asia, driving is a major risk, and in his own time Shibu Vargheese in Singapore developed an innovative safety campaign using modern technology and a variety of media that has been adopted at regional level.

The Middle East and Africa team as a whole were rewarded for their contributions towards travel security and safety, achieving outstanding performance in the face of extreme challenges to keep people safe.

All the winners have displayed a professionalism well beyond the normal call of duty.

This year we described the behavioural competences required for success in all roles across the Group. The competences form the foundations for managing performance and, as they apply to both leadership and professional pathways, will lead to the wider development of our talent – providing clarity of expectation and development opportunities.

They were launched with this year’s performance appraisal (PPP) cycle, and early feedback is very positive regarding their impact on performance management meetings. There has been a real focus on improving the value of PPP in recent years, including ensuring these important discussions take place. We want managers and leaders to make the most of this opportunity to achieve business results through motivating, developing and engaging with their people. The results of last year’s PPP cycle (2010/11) showed a significant improvement in the completion rate with 82%, compared to the previous year’s 75%, and we need to continue to build on this success.

Career pathways Over the past 18 months significant investment has gone into the development of the technical career path framework within Energy. Rolled out to managers in 2012, this programme is now live for all employees. Elements of the career pathway include:

• new role profiles for surveyor and inspector, specialist and project management jobs with clear distinctions in skills, qualifications and responsibilities between grades

• career route maps – highlighting possible next moves together with additional skills, qualifications and required behaviours in order to progress

• manager’s toolkit – with hints, tips and advice on how to better prepare for and structure career conversations, together with role play videos to improve performance

• resource library – links to other Lloyd’s Register resources, white papers and recommended reading

• frequently asked questions – answering all the common questions people have about developing within Lloyd’s Register.


100A1 = constructed under Lloyd’s Register

survey; 100 = suitable for seagoing service; A = constructed or accepted into Lloyd’s Register class and maintained in good and efficient condition; 1 = good and efficient anchoring and mooring equipment.

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.

B

Blowout preventerA blowout preventer is a large, specialised valve or similar mechanical device, used to seal, control and monitor oil and gas wells. Blowout preventers are critical to the safety of crew, rig and environment, and to the monitoring and maintenance of well integrity.

C

Certification The process of evaluation that results in a written statement, usually by a third party, that a system or component complies with its specified requirements and is acceptable for operational use.

Classification The development, implementation and maintenance of standards (Rules) for the design, construction and operation of ships and offshore units. Compliance with these standards ensures assignment and maintenance of class.

Clean Development Mechanism (CDM) A greenhouse gas emissions reduction project in a developing country where the investor is from an industrialised country. Both countries must have ratified the Kyoto Protocol.

D

Deadweight tonnes (dwt) The maximum weight of cargo and stores that a ship can carry.

De-rating De-rating (or derating or de-tuning) is the operation of a machine at less than its rated maximum power in order to prolong its life.

E

Emission control areas (ECA)MARPOL Annex VI sets global limits on sulphur oxide (SOx) and nitrogen oxide (NOx) emissions and it allows emission control areas (ECAs) to be established to control both types of emission. An ECA can be designated subject to a proposal from a party to Annex VI. Existing emission control areas include: Baltic Sea and North Sea, SOx; North American (NOx and SOx); US Caribbean (NOx & SOx). More areas are likely to follow.

Emissions trading schemes Emissions trading (also known as cap and trade) is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. The largest scheme is the EU Emissions Trading Scheme (EU ETS), known also as the EU Emissions Trading System, which requires installations to monitor and report their carbon dioxide emissions and enables them to trade carbon dioxide emission ‘credits’.

Energy efficiency for ships in MARPOL Annex VI – EEDI and SEEMPThe Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships, will become mandatory from 1 January 2013 for ships of 400 gt and above, under MARPOL Annex VI, the first globally binding climate change measure applying to the transport sector. The EEDI is a design index, primarily applicable to new ships, that has been developed by the IMO and is to be used as a tool for control of CO2 emissions from ships. The SEEMP is a mechanism for ship operators to improve the energy efficiency of ships by managing their individual efficiency measures.

European Rail Traffic Management System (ERTMS)The European Rail Traffic Management System (ERTMS) is 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. The two main components of ERTMS are the European Train Control System (ETCS), a standard for in-cab train control, and GSM-R, the GSM mobile communications standard for railway operations.

F

Feed-in tariffA feed-in tariff is a policy mechanism designed to accelerate investment in renewable energy technologies. The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing the price certainty and long-term contracts that help finance renewable energy investments.

Floating liquefied natural gas (FLNG)FLNG refers to water-based LNG operations, still to be built, employing technologies designed to enable the development of offshore natural gas resources. Floating above an offshore natural gas field, the FLNG facility will produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to market.

Floating offshore installation (FOI) Relates to any kind of floating installation regardless of its capability.

Floating production, storage and offloading vessel (FPSO) Floating production unit which can process and store oil or gas as it is extracted from the seabed before delivering to export.

FSSC 22000 FSSC 22000 is the first global food safety management certification scheme specifically targeted for the certification of manufacturing and processing of food ingredients and food products. The FSSC scheme is based on ISO 22000 (requirements for food safety management systems) and PAS 220 (requirements for prerequisite programmes for food manufacturing).

G

Global Food Safety Initiative (GFSI)The Global Food Safety Initiative is 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

Handysize Bulk carriers up to 50,000 tonnes dwt. This allows the ships to enter smaller ports around the world and to pick up smaller cargoes.

GLOSSARY


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.

International Maritime Organization (IMO) The specialised agency of the United Nations with responsibility for safety and security at sea and the prevention of marine pollution from ships. Established in 1948, IMO first met in 1959 and is the only United Nations agency with its headquarters in London.

ISO 9001 The international management systems standard concerned with quality management – what an organisation does to ensure customer satisfaction by meeting customer needs and expectations and applicable regulatory requirements, and continually to improve its quality performance.

ISO 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 14064An 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 50001ISO 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.

L

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.

M

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.

MARPOLIMO ship pollution rules are contained in the ‘International Convention on the Prevention of Pollution from Ships’, known as MARPOL.

Mewis DuctThe Mewis Duct, a highly efficient energy-saving device, consists of two fixed elements mounted on the vessel: a duct positioned ahead of the propeller together with an integrated fin system within. The duct improves the water flow to the propeller to achieve a higher overall propulsion efficiency. Named after the inventor Friedrich Mewis, it is developed, manufactured and retailed by Becker Marine Systems.

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

OECDThe Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade.

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

PAS 55 (BSI Publicly Available Specification 55) A consistent framework for asset management systems. It was developed as a quality benchmark for management practices in asset-intensive industries such as power, oil and gas, and transportation.

R

Risk-based approach A basis for making decisions by identifying the greatest risks and prioritising efforts to eliminate or control them.

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.

S

Shale gasShale gas is natural gas formed from being trapped within shale formations. Shale gas has become an increasingly important source of natural gas in the US over the past decade, and interest has spread to potential gas shales in the rest of the world.

Ship Energy Efficiency Management Plan (SEEMP)See energy efficiency for ships.

T

Tight gasTight gas refers to natural gas reservoirs which are difficult to access because of the nature of the rock and sand surrounding the deposit. Because this gas is so much more difficult to extract than natural gas from other sources, hydraulic fracturing and directional drilling is necessary to produce the well.

U

Upstream The exploration, production and transport of oil and natural gas prior to refining.

Lloyd’s Register – Group Review

2012

www.lr.orgLloyd’s Register Group Services Limited is a subsidiary of Lloyd’s Register Group Limited.

Care is taken to ensure that all information provided is accurate and up to date. However, Lloyd’s Register Group Services Limited accepts no responsibility for inaccuracies in, or changes to, information.

Copyright © Lloyd’s Register Group Services Limited. Pub. 11/2012

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