Lamprell warns of $105m full-year loss

External review reveals figure will be worse than previously feared

Lamprell, the specialist engineering group, warned that higher costs and deferred contracts would see it incur a $105m full-year loss following an external review of its business.

The admission follows a series of profits warnings and the recent departure of chairman Jonathan Silver and other senior executives.

One analyst described the update and warning of wider losses as a “kitchen sink”.

The group’s shares, which traded as high as 368.7p in May, fell by a tenth before recovering to close up 12 per cent at 77.76p on Monday.

Lamprell said last month that Nigel McCue would step down as chief executive alongside chief financial officer Jon Cooper and chief operating officer Chris Hand.

Their exits followed a number of profit warnings and a commitment by John Kennedy, recently installed as chairman, to clear out senior managers at the Dubai-based contractor.

On Monday Mr Kennedy said an external review to assess Lamprell’s financial position had “revealed a much greater loss for the year than previously announced or anticipated”.

He added: “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.”

Cost overruns and late delivery penalties on a $320m order for two vessels for shipping group Fred Olsen, designed to be used for installing offshore wind turbines, have been a drag on profitability.

Lamprell fell to an interim loss of $47m in the six months to June. Brokers had been forecasting a full-year loss of about $30m ahead of October’s warning and management changes.

But the company – whose traditional business has been the supply and repair of rigs and platforms to the oil and gas sector – has also been forced to forecast wider losses because of deferrals, cost overruns and bad debt provisions on a number of other contracts.

Last week it hired Frank Nelson as chief financial officer to work alongside Peter Whitbread, former chief executive, who has been drafted in until a permanent successor to Mr McCue is found.

Lamprell said it expected 2013 to be a “recovery year”, with revenue broadly flat compared to 2012 and a gradual return to profitability during the year.

It added that discussions were continuing with its banks to secure waivers of its banking covenants due to be tested at the end of this year.

“The group remains confident of support from its lenders during this challenging time for the business,” it said.

Broker Investec maintained its “hold” recommendation, pointing to Lamprell’s $1.4bn order book. But it added: “At present there is clearly a long road to recovery and we see limited near-term upside.”

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