Lamprell Enters "Critical" Year After Wind Farm Project Struggles

22nd Mar 2018 11:41

LONDON (Alliance News) - Oil rig constructor Lamprell PLC's shares fell on Thursday as it reported revenue more than halving in 2017 on the year before as it counted the cost of its wind farm project off the east coast of England.

Revenue fell to USD370.4 million for 2017 compared to USD705.0 million, which Lamprell said was in line with guidance, with the firm saying at the end of January it expected revenue at the lower end of its USD370.0 million to USD390.0 million guidance range.

This is expected to fall further in 2018 to between USD225.0 million and USD33.0 million due to low activity since July and the lack of major contract wins in 2017.

On a reported basis, Lamprell's pretax loss narrowed to USD97.9 million from USD181.9 million. However, removing a USD183.9 million impairment charge in 2016, Lamprell swung to a loss after posting a pretax profit of USD2.0 million in 2016.

Lamprell said it expected 2017 to be its toughest year to date, as broader industry pressures hit revenue, only to be compounded by "major" operational issues on the East Anglia One project.

Due to its difficult trading, Lamprell will not pay a dividend in 2017, having not done so in 2016 either.

In January, the firm expected to breach its debt facility covenants due to money lost on East Anglia One, having booked an approximate USD80.0 million loss on the project. Additional costs were incurred by the need for extra staff and equipment, as well as additional shipping and contractor costs.

East Anglia One is an offshore wind farm project off the Suffolk coast, which will eventually consist of 102 turbines.

The year saw the completion of three new jack-up rigs, and following that Lamprell moved on to two major projects won in 2016: East Anglia One and Master Marine. Unlike East Anglia One, its Master Marine project is going well.

Looking to 2018, Lamprell said it will be a "critical" year. It will aim to manage overheads, but they will rise nonetheless due to bidding expenses and personnel hire.

The bid pipeline is up to USD3.6 billion compared to USD2.5 billion at the end of 2016, but major project awards will be pushed towards the end of the year and will only create revenue in 2019.

Non-Executive Chairman John Malcolm said: "We experienced significant challenges throughout 2017 and these have had a profound effect on the way that we approach and implement our vision. We streamlined the business over the past two years and we have adapted and added to our resources to support the strategic objectives."

"We are now entering into a phase of delivering on our goals," Malcolm added. "The board is confident that transformational growth and diversification is the right strategy for Lamprell for future success."

Shares in Lamprell were 5.4% lower at 66.60 pence on Thursday.

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