Lamprell tanks as it says FY revenue will be at lower end of guidance

Engineering services group Lamprell tanked on Monday after it said revenue for 2017 is likely to be at the lower end of its guidance amid challenging market conditions.

The company said the current market was pointing towards the lower half of its revenue guidance range of $400m to $500m for 2017 and that as a result of its decision to retain its core competitive strengths during the restructuring programmes, it expects margin pressure at these revenue levels although it also expects to sustain positive cash generation.

Following its announcement back in May, Lamprell has carried out a further 20% reduction in its administrative staff headcount, including some redundancies at the senior management level. In addition, as a number of large projects have progressed to delivery or final stages of construction, the group has released the related yard workforce, resulting in an overall reduction in headcount to around 4,000 people at the end of 2016.

For 2016, Lamprell expects revenue of about $700m, down from $871.1m the year before and below consensus expectations of around $750m.

Executive chairman John Kennedy said: "The board recognises and welcomes recent change in oil & gas market sentiment and the likelihood of stronger product pricing in 2017, especially as the year elapses. However, we also recognise that all our customer 2017 capital budgets are already established and in place, and that there is little expansive flexibility in the associated expenditures.

“For these reasons, the company continues to believe that 2017 will prove a particularly cautious environment, and will continue to maintain tight control over expenditure and expenses and, more especially, continue to position Lamprell for work in future years."

At 0930 GMT, Lamprell shares were down 7.2% to 94p.