Lamprell to cut operations down to one yard, details cutting programme

Lamprell PLC (LON:LAM) has announced it will consolidate its operations down to one yard, from three, as the engineer continues to respond to market conditions created by the coronavirus crisis.

The company said that the Jebel Ali facility has been mothballed, effective from January, and, the Sharjah facility will close once ongoing work on the Moray East project is completed later this year.

The consolidation comes with significant headcount reductions, and, deliver around US$23mln of overhead reductions for 2020, with around 90% cash savings.

Restructuring will result in a non-cash impairment charge of US$13.2mln for the 2019 financial results statement, with a further US$7.5mln in 2020’s.

READ: Petrofac cancels US$85mln dividend due to coronavirus

Lamprell said it now planning for low levels of critical-only capital expenditure, below US$10mln in 2020.

It expects these measures will preserve cash and maximise liquidity during a period of low revenue and slower contract awards.

“We are operating in a period of unprecedented global uncertainty, focusing on the safety and sustainability of our operations and the health and wellbeing of our employees,” said Christopher McDonald, chief executive.

“Amidst industry-wide insecurity and distress, we continue to deliver our projects safely and reliably and we remain focused on strict financial discipline to sustain a healthy balance sheet and progress our strategy.” 

Additionally, the company noted that it has reduced fees, salaries and allowances for board members, senior management, and all of professional staff by 25% for the next six months. Where operationally feasible it has placed staff on reduced hours and used other measures, such as unpaid leave, and redundancies have also been implemented.

It expects those measures will save around US$10mln in 2020.

The company noted that it is now debt free, after payments last month, and at the end of March, it had US$77mln of cash – of which US$35mln is restricted. Lamprell said it is assessing funding options.

Also, it has begun talks over the potential deferral of its next instalment of strategic capital expenditure in the Saudi maritime yard, currently scheduled for this year.

Revenue guidance for 2020 has been withdrawn. The company noted that at the end of 2019 its order book backlog stood at US$470.1mln, with US$275mln scheduled to run off in 2020.

Amid an FCA ruling, to defer financial results statements, the company said it will confirm the date for the release of its preliminary results as soon as the reporting schedule has been finalised with its auditors.

Story by ProactiveInvestors