The profit slump at engineering and contracting services group Lamprell (LAM) can be largely explained by the $25m (£19m) settlement the company made to offshore drilling contractor Ensco over the late delivery of a jacking rig. Lamprell found a technical issue during the commissioning and testing process which, despite a clear solution, resulted in a substantial delay. Lamprell blamed Cameron - the company that provided the jacking equipment - for the failure, which it said had tarnished the group's otherwise "excellent track record".
Thankfully, this hasn't hampered the rest of the Ensco project. Lamprell still expects to deliver six more rigs over the next eight months - all on time. However, the payment means full-year revenues are expected to fall short of market expectations.
More generally, continued weakness across oil and gas markets has meant large project awards are drying up and Lamprell's bid pipeline is only worth $3.9bn compared with $5.4bn at the end of December 2015. A jump in the share price reflected Lamprell's commitment to keep cutting costs, with headcount down 10 per cent in the second half. This helped keep underlying margins flat despite lower activity in higher-margin areas such as rig refurbishment and construction.
Analysts at Liberum expect to update their forecasts in light of the latest figures, but previously expected adjusted EPS of 3.9¢ this year, rising to 7.4¢ in 2017.
| LAMPRELL (LAM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 60.75p | MARKET VALUE: | £208m | |
| TOUCH: | 60.5-61p | 12-MONTH HIGH: | 142p | LOW: 55p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 6 | |
| NET ASSET VALUE: | 215¢* | NET CASH: | $152m | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 351 | 20.4 | 5.9 | nil |
| 2016 | 451 | -4.2 | -1.3 | nil |
| % change | +28 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of $206m or 60¢ per share £1 = $1.30 | ||||
