Lamprell plc Pre-Close Trading Update (7854U)
23 January 2017 - 6:00PM
UK Regulatory
TIDMLAM
RNS Number : 7854U
Lamprell plc
23 January 2017
23 January 2017
LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")
PRE-CLOSE TRADING UPDATE
Lamprell (ticker: LAM), a leading provider of diversified
engineering and contracting services to the onshore and offshore
oil & gas and renewable energy industries, today provides an
update on its current trading.
Lamprell has retained its focus on operational performance and,
during 2H 2016, three rigs have been delivered on time, with the
three further rigs currently under construction in our Hamriyah
yard progressing to plan for delivery in 1H 2017.
The Group's strong safety performance continued with the Jebel
Ali yard achieving over 15 million manhours and over 1,500 days
without a Day Away From Work Case. Our safety track record
strengthens our competitive position with top tier clients.
Lamprell was also recognised by being awarded a regional Corporate
Health and Wellness Award for a third consecutive year.
Lamprell has adapted to market pressures by continuing its
programme of cost-cutting in overheads. Following the announcement
in May 2016, the Group has undertaken a further 20% reduction in
its administrative staff headcount which includes some redundancies
at the senior management level. Further, as several large projects
have progressed to delivery or final stages of construction,
Lamprell has released the related yard workforce, resulting in an
overall reduction in headcount to around 4,000 people at the end of
2016. While making these reductions, we have deliberately retained
our core competitive strengths, to ensure that Lamprell is
well-positioned as the market recovers.
As expected, 2016 saw lower levels of walk-in work than the
previous year. Most of the rigs stacked in Lamprell's facilities
throughout the year remained inactive, having generated only
limited refurbishment revenue. Consequently, Lamprell's revenue for
the year is expected to be approximately US$700 million (subject to
final audit).
The industry environment remained challenging throughout 2016
and the Group was pleased to end the year with two significant
contract wins. The US$225 million contract award from ScottishPower
Renewables for the fabrication of 60 foundations for the East
Anglia One Offshore Wind Farm demonstrated the versatility of
Lamprell's skills and expertise, and its ability to generate
revenue outside of its traditional markets but within its core
technical competence. Together with the US$90 million award from
Master Marine AS for the upgrade of the mobile operating unit
"Haven", these wins significantly increased the level of revenue
coverage for 2017. Our existing revenue guidance of US$400-500
million for 2017 performance is therefore maintained, with the
current market pointing towards the lower half of the range. As a
result of our decision to retain our core competitive strengths
during the restructuring programmes, we expect margin pressure at
these revenue levels although we expect to sustain positive cash
generation.
The management continues to review its headroom against goodwill
in the context of current trading conditions, its market
capitalisation and the outlook for the markets in which the Group
operates. Significant value continues to be attributed to goodwill
as a result of the MIS transaction which was completed in 2011.
Management continues to monitor the value of goodwill in light of
new awards and Lamprell's business outlook.
The Group's activity levels have allowed it to remain highly
cash generative, with inflows from final payments on deliveries
received at the end of 2016 and with further receipts due
throughout 1H 2017. As a result, Lamprell maintains a strong
balance sheet and a robust cash position, with 2016 year-end net
cash expected to exceed the previous year. This puts Lamprell in a
strong position to consider strategic growth opportunities through
alliances. Discussions on the Saudi Arabia's Maritime Yard continue
to progress and the market will be updated on the outcome as
appropriate.
John Kennedy, Executive Chairman, Lamprell, commented:
"The board recognises and welcomes recent change in oil &
gas market sentiment and the likelihood of stronger product pricing
in 2017, especially as the year elapses. However, we also recognise
that all our customer 2017 capital budgets are already established
and in place, and that there is little expansive flexibility in the
associated expenditures. For these reasons, the Company continues
to believe that 2017 will prove a particularly cautious
environment, and will continue to maintain tight control over
expenditure and expenses and, more especially, continue to position
Lamprell for work in future years."
Lamprell will announce its full year 2016 financial results on
24 March 2017.
- Ends -
Enquiries:
Lamprell plc
John Kennedy, Executive Chairman +971 (0) 4 803 9308
Christopher McDonald, Chief
Executive Officer +971 (0) 4 803 9308
Tony Wright, Chief Financial
Officer +971 (0) 4 803 9308
Natalia Erikssen, Investor
Relations +44 (0) 7885 522989
Tulchan Communications, London +44 (0) 207 353 4200
Martin Robinson
Martin Pengelley
This information is provided by RNS
The company news service from the London Stock Exchange
END
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