Lamprell plc LAM Interim Management Statement

  Lamprell plc (LAM) - Interim Management Statement

RNS Number : 3927R
Lamprell plc
19 November 2012




                                      

19 November 2012

                                      

                                 LAMPRELL PLC
              ("Lamprell" and with its subsidiaries the "Group")

                                      

                INTERIM MANAGEMENT STATEMENT / 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,  issues  its   latest  Interim  Management  Statement   in 
accordance with the EU Transparency  Directive, which also provides a  trading 
update in light of the previous announcement on 3 October 2012. The  statement 
covers the period from 1 July 2012 to date.



John Kennedy, Chairman, Lamprell, commented:



"Over the  last month  or so,  the Company  has worked  closely with  external 
consultants  to  assess   more  accurately   the  potential   impact  of   the 
underperforming projects on the Company's financial performance. This  review 
has revealed a  much greater loss  for the year  than previously announced  or 
anticipated, and  naturally  I  am very  disappointed.  However,  having  now 
identified the issues and their potential financial impact, the Group is in  a 
much better position to draw a line under these events and to take appropriate
steps to mitigate or address the issues.  The Group also is keen to focus  on 
new projects which are more aligned with its core competencies.



The outcome  of  this  review  vindicates  the  Board's  earlier  decision  to 
restructure the  management team.  In so  stating, it  is also  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. The bidding pipeline  remains highly active and the Board  has 
full confidence in the new management  team, with the assistance of the  wider 
dedicated and  capable  workforce, to  take  robust  action to  see  that  the 
performance of this Company fulfils its significant potential."



Key points for the relevant period



·  Completion  of  review  of  major  projects  by  external   consultants 
validating the Group's revised financial position

· Projected losses for the full  year 2012 increase significantly, with  a 
gradual return to profitability during 2013

· Progress made in making new appointments to the Board and  strengthening 
the management team

· Initial  management  actions  to enhance  project  control  and  improve 
broader risk management

· Discussions continue with lenders to  obtain a waiver of certain of  its 
year-end banking covenants and a reset of applicable covenants in Q1 2013





MATERIAL EVENTS AND TRANSACTIONS



Financial impact assessment

Following the Company's trading update on 3 October 2012, the Board  appointed 
a major  international  accountancy  and  consultancy  firm  to  undertake  an 
independent assessment of the expected outturn on specific, major projects and
their impact on the financial position of the Group. The external consultants
have worked closely with the Company over the intervening period to review all
relevant data and they  have now completed their  assessment. The Company  has 
also conducted its own broader assessment  of its business and, together  with 
the  external  consultants,  has  'stress-tested'  the  review  of  the  major 
projects. In all material  respects, the conclusions from  the review by  the 
external consultants and the Company's own assessment are aligned.



In light of  the new data  provided, the Board  anticipates a total  projected 
loss for 2012 in the region of US$105 million (with EBITDA loss in the  region 
of US$64  million).  This  increased  estimate  has  arisen  as  a  result  of 
additional losses and delays or deferrals  on a number of individual  projects 
as follows:



• Windcarrier 1: additional losses amounting to US$9.7 million;



• Windcarrier 2: now  forecast by management to  be delivered in  February 
2013 resulting in an additional loss for 2012 of US$18.2 million;



• Caspian  Sea  jack-up  project:  due  to  low  labour  productivity  and 
restricted availability of  equipment at a  third-party facility, the  project 
for the first rig  is expected to  result in a shortfall  for 2012 of  US$24.6 
million; 



• Offshore platform project: client delay  caused a deferral from 2012  to 
2013 of a gross margin figure of US$9.3 million;



• Minor  EPC project:  a delay  in reaching  mechanical completion  caused 
extra costs this year in the amount of US$6.1 million;



• Timing shift on projects: adversely impacted the current year by  US$8.0 
million;



• Increased advisory and banking fees for 2012: US$4.0 million; and



• Bad debts and other losses: US$8.1 million.



The Company is taking various steps  to mitigate the potential losses  above. 
Despite the challenges the  Group faces, it is  encouraged by the  significant 
support that it continues to receive  from its customers, as evidenced by  the 
recent award  of a  contract by  Seajacks. The  Group's strong  order book  is 
approximately US$1.4  billion, with  most of  the potential  projects in  core 
disciplines in which the Group has a strong track record.



In addition, the Group remains in discussions with its lending banks in  order 
to seek waiver of certain of its banking covenants before the year-end, and  a 
reset of  applicable covenants  in Q1  2013. The  Group remains  confident  of 
support from its lenders during this challenging time for the business.





Corporate matters

As announced on 3 October, the Board has been seeking to make appointments  to 
replace the  previous Executive  Directors and  to strengthen  the  management 
team. In this regard, Peter Whitbread (former Lamprell CEO) was  re-appointed 
to the position of Chief Executive Officer and re-appointed to the Board;  the 
Group also  recently  welcomed  the  appointment  of  Frank  Nelson  as  Chief 
Financial Officer  and Alex  Ridout as  the new  Company Secretary  &  General 
Counsel.



The Board notes the on-going investigation by the Financial Services Authority
("FSA") into the Company's handling of inside information prior to 7 June 2012
and further notes  that the Company  is fully cooperating  with the FSA.  The 
Company will update the market on the outcome in due course.



On 6 September 2012, the Company announced that it had signed a joint  venture 
agreement with  Shoaibi  Group  and  Al Yusr  Townsend  and  Bottum  L.L.C  to 
establish a joint venture for new-build fabrication, refurbishment and  repair 
of land drilling rigs in Saudi Arabia.



Early in Q3 2012, a new contract  was awarded to Lamprell by Seajacks for  the 
design, construction and delivery of a new liftboat of a non-prototype nature,
similar  to  the  vessels  that  the  Company  has  already  constructed   and 
delivered.





Outlook



The execution and  completion of  the current projects  in a  timely and  high 
quality manner is of paramount importance to the Group. Moving into 2013, the
Company will refocus  on projects  which are closer  to the  core business  of 
Lamprell. In this way, the Company can leverage its historical strengths  and 
move forward positively.



The  Company  considers  the   focus  on  new-build   jack-up  rigs  and   rig 
refurbishment as a key priority for  the Group. In the short-to-medium  term, 
the Group's  order  book of  secured  contracts  is expected  to  support  the 
business' recovery through  to the end  of 2013. Longer-term,  the Company  is 
encouraged by  the  strong  bidding  activity across  the  business  with  the 
pipeline totalling more than US$4.0 billion.  With that in mind, the  Company 
expects 2013 to be a recovery year, with revenue broadly flat compared to 2012
and a gradual return to profitability during the year.





                                   - Ends -



Enquiries:



Lamprell plc
John Kennedy, Chairman                 +44 (0) 207 920 2347
Frank Nelson, Chief Financial Officer  +971 (0) 4 803 9227
Ekaterina Alferova, Investor Relations +44 (0) 7570 813428
M:Communications, London
Patrick d'Ancona             +44 (0) 207 920 2347
Andrew Benbow                +44 (0) 207 920 2344



Cautionary Statement



This announcement contains certain forward-looking statements with respect  to 
the financial  condition  and  operational results  of  Lamprell  plc.  These 
statements and  forecasts involve  risk, uncertainty  and assumptions  because 
they relate to  events and depend  upon circumstances that  will occur in  the 
future. There are  a number  of factors that  could cause  actual results  or 
developments to differ  materially from  those expressed or  implied by  these 
forward-looking statements. These forward-looking statements are made only as
at the  date of  this announcement.  Nothing in  this announcement  should  be 
construed as a profit forecast. Except  as required by law, Lamprell plc  has 
no obligation  to update  the  forward-looking statements  or to  correct  any 
inaccuracies therein.



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


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