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Jack up rig builder Lamprell plc (LSE:LAM) still enjoys the confidence of its creditors, the company hinted today, even as it revealed there will be a “much greater loss” than previously projected when the current financial year ends following delays in delivery of major projects supposedly scheduled to be completed this year.
In a statement, the UAE-based engineering and contracting firm said “the Group remains confident of support from its lenders” despite an anticipated loss of about US$105 million by the end of 2012, a 180-degree turn from the US$63 million profit it earned in 2011.
“Naturally, I am very disappointed,” commented John Kennedy, Chairman of Lamprell, which is now seeking a waiver of some of its banking covenants after failing to meet them during the first half of the year.
Lamprell recorded a net debt of US$35.7 million as at 30th June 2012, over a third of its debt for the whole of 2011.
From Small to Significantly Greater to Much Greater Loss
But what was told to be a “small loss” back then in May had turned out to be “significantly greater” in July and as at 19th November 2012, has escalated to “much greater loss” status, following an independent audit commissioned about a month ago.
The report provided Lamprell with an additional US$78.7 million in additional losses the majority of which is due to delays of Windjammers 1 and 2 and the Caspian Sea Jack-up project at a combined cost of US$52.5 million.
Lamprell has already incurred a net loss of US$47.1 million during the January to June period from a revenue of US$528.1 million with the anticipated full year revenue still standing at US$1.1 billion, as reported by the firm in its half year results.
Delayed Gratification
This will be the first time Lamprell will post a loss since it enlisted on the London Stock Exchange six years ago, even during the financial crisis, albeit at a lower profit.
But while the firm will not be making money out of their operations this year, investors seemed to have given its vote of confidence, notwithstanding, as shares gained as much as 20% earlier to setting at 79 pence by 1:00 PM GMT, or 14.1% higher than yesterday’s close of 69.25 pence.
Lamprell’s closing share price yesterday, however, is only about a fifth of its value before the company dropped its first profit warning back in May.
Investors who traded over eight million shares five hours after London opened earlier must have placed their bets on the fact that Lamprell’s order book – standing at US$1.4 billion – never changed despite the losses. The profit, as was previously indicated by the company, will simply have to be realised at a later time – in 2013.
“It is… important to re-affirm that the fundamental, underlying strength of the Lamprell business and its on-going competitive advantage in the marketplace is as strong as it ever has been,” Chairman Kennedy stated.
