Lamprell H1 revenues drop, cuts full-year guidance

Oil rig builder Lamprell posted a drop in first-half revenue on Friday as it warned that revenue for 2018 would be 10% lower on the year.

In the six months to the end of June, revenue fell to $159.2m from $451.3m, which the company said was broadly in line with its expectations.

Still, earnings before interest, taxes, depreciation and amortisation rose to $13.5m from $10m in the same period a year ago.

Lamprell said revenue for the full year is expected to come in between $370m and $390m, which is slightly below previous guidance mainly due to the continuing low levels of walk-in work, reflecting market conditions. Back in March, the company said revenue for the year was expected to be in the lower half of its $400m to $500m range.

Looking ahead, the outlook for FY2018 remains "challenging", with revenue expected to be down around 10% from 2017 levels, contingent on the timing of potential contract awards.

Lamprell said turbulence in the oil and gas market continued throughout 2016 and although there are early signs of a recovery, it expects 2017 will probably be the toughest year to date for the group. The timing of its projects partially shielded it from the full impact of the downturn, but Lamprell said it is now shifting from a period of record activity in its facilities to a quieter 2017 as projects have progressed to final stages.

Chief executive officer Christopher McDonald said: "The business continues to deliver solid results broadly in line with our expectations despite the challenging market environment. Our balance sheet remains robust due to the combination of the efficiency measures we have taken over the past two years and our tight cost control measures.

"This places us in a good position to be cost competitive and maintain our discipline in bidding for new work. Lamprell continues to be well positioned with a strong balance sheet, and our strategy is designed to support near-term resilience and secure long-term sustainable growth."

Investec downgraded its stance on the stock to 'hold' from 'buy' and slashed the price target to 81p from 131p following the update.

"We see the next 12 months being tough for Lamprell as it works towards rebuilding its order book. The $3.1bn bidding pipeline is encouraging although it includes new strategic sectors like renewables and EPC, which carry higher execution risks.

"Any awards from the Saudi Maritime JV or this pipeline will be unlikely to start before FY19. The strong cash balance, although coming down, does allow management time to execute their strategy."

At 1140 BST, the shares were down 11% to 88.50p.