Lamprell warns over 2017 earnings due to East Anglia project costs

Oil services group Lamprell said on Thursday that its earnings for 2017 are likely to be "materially below" current market expectations as its East Anglia offshore windfarm project is expected to make a "significant" loss.

The company said there were start-up costs and inefficiencies related to the project and "the learning curve has proven to be steeper than anticipated".

"We remain confident of meeting our client's expectations in terms of schedule and quality but we will incur extra costs to achieve this. As a result, we now expect the project to make a significant loss, which will be booked in 2017."

Lamprell said it's working with its client and supply chain to mitigate the additional costs and will be able to make an announcement about the financial impact in due course, as it works through the variable factors that will ultimately affect the costs on the project.

It expects earnings before interest, tax, depreciation and amortisation to be materially below market views, but revenue for 2017 should be in line.

"We remain of the view that the renewables market presents significant potential for the growth of the group and we are convinced that the lessons learned from this first project in the sector have strengthened our capabilities. This will help to position us competitively for future project awards."

Numis said: "Whilst a near-term negative for sentiment, it has no impact on our underlying investment thesis and we maintain our buy rating and unchanged price target."

It said its 2017 EBITDA forecast is $7m and consensus is currently $16m and has been falling in recent weeks.

"We expect Lamprell to take the entire anticipated project loss as much as possible in its 2017 results. We do not expect a material impact on EBITDA forecasts for 2018 and beyond," the brokerage added.

Investec said: "We understand these negotiations involve multiple parties (the client, Scottish Power, and other supply chain members) and could take four to six weeks to be resolved; therefore we are not going to know the size of the FY17E downgrade until at least January 2018."

At 1210 GMT, the shares were down 11% to 62.40p.