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Lamprell makes investors wait

The rig contractor faces a testing interlude prior to the commencement of its joint venture with Saudi Aramco
September 26, 2017

Lamprell (LAM) is hardly the first oil services company to report persistent softness in energy markets, but investors may need to look beyond 2018 before the group’s burgeoning pipeline feeds through to the income statement.   

IC TIP: Hold at 88p

The bid pipeline has swollen to $3.1bn (£2.3bn) from $2.5bn at the end of 2016. But with only two major projects in train between now and the end of next year, it’s little wonder that the shares were marked down on release of half-year figures that featured a further reduction in full-year revenue guidance to $370m-$390m.

Christopher McDonald, the group’s chief executive, said that despite “increased levels of bidding activity” it is unlikely to register revenue growth until 2019. The nature of Lamprell’s engineering contracting – capital intensive, front-loaded costs, etc – entails a substantial lag between contract award and fulfilment. So even if activity picks up, it isn’t immediately reflected in financial performance.

JPMorgan Cazenove gives an adjusted net earnings loss of $1m for the December year-end, leading to a loss per share of 0.2¢, against a profit of $44m and EPS of 13¢ in 2016.

LAMPRELL (LAM)   
ORD PRICE:88pMARKET VALUE:£301m
TOUCH:87.75-88p12-MONTH HIGH:125pLOW: 65.5p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:164¢NET CASH:$306m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2016451-4.2-1.3nil
20171591.20.3nil
% change-65---
Ex-div:-   
Payment:-   
£1=$1.35