TIDMLAM
RNS Number : 4852J
Lamprell plc
14 April 2020
14 April 2020
LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")
UPDATE ON OPERATIONAL RESTRUCTURING & COVID 19 SELF-HELP
MEASURES
Further to our announcement on 16 January 2020, Lamprell
provides an update on the implementation of its self-help programme
aimed at achieving a significant reduction in the Group overhead
and an improvement in operational efficiencies, as well as on the
impact of the ongoing global health crisis on the business.
Overhead reduction programme
Having reviewed its current operational footprint against medium
term fabrication requirements, the Group has made the decision to
consolidate its operations within one yard for the time being. As
such, the Jebel Ali facility has been mothballed from January 2020.
The Sharjah facility currently hosts some of the work on the Moray
East project and will be closed upon its completion later this
year. The Hamriyah yard is our largest facility and continues to
operate, offering various expansion opportunities should the Group
require additional space. These actions allow for the Group to
gradually grow fabrication volumes whilst significantly improving
efficiency and reducing its cost base.
The measures are associated with significant headcount and
allowance reductions, most of which have already been
implemented.
Further, the measures translate into an approximately USD 23
million reduction in overheads for 2020, of which over 90% relates
to cash overheads.
Subject to audit, the restructuring will result in a non-cash
impairment charge of Intangible and Immovable assets in Sharjah of
approximately USD 13.2 million in the 2019 financial statements. In
2020 there will be an estimated one-off charge of USD 7.5 million
which relates to the demolition costs in Sharjah and staff
termination costs.
We are also planning for low levels of critical-only capital
expenditure at our facilities, with a total value below USD 10
million in 2020.
These steps will help preserve our cash and maximise liquidity
in a period of low revenue and slow pace of major contract awards,
whilst retaining core capacity for future growth.
Covid 19 actions
The health and wellbeing of our employees is a key priority for
us and we have been taking numerous steps since February in light
of the increasing threat of the Covid-19 virus. We have a programme
to screen and protect our workforce, clients and contractors on
site as a result of the coronavirus pandemic. Most of our corporate
and administration functions are working remotely wherever
possible, with engineering and fabrication activities in Hamriyah
and Sharjah moderately affected by lockdown and social distancing
measures in the UAE so far. As such, all works, including the two
IMI rigs and the Moray East project, continue with the first
jackets delivered to the client on time and on budget. However, we
believe it is too early to make a comprehensive and final
assessment of the impact of the virus on our business, and despite
the swift the decisive actions taken to protect our business and
our workforce it is inevitable that there will be some impact on
productivity and increased costs as we act prudently to respond to
the threat.
Further to the earlier overhead cost savings detailed above, and
in order to conserve cash and protect the business during this
period of unprecedented market conditions, we have taken the
following additional actions:
-- Reduced fees, salaries and allowances for our Board, senior
management, and all of our professional staff by 25% for the next
six months.
-- Where operationally feasible, we have also placed staff on
reduced working hours for those that are under-utilised and used
other measures such as unpaid leave.
-- Redundancies, regrettably, have also been implemented where
there is no medium-term horizon for staff to be used.
We expect these measures to save approximately USD 10 million in
2020, and we will continue to consider scope for further action as
the crisis develops.
Balance sheet and liquidity
The Group is now debt free as our facility was fully repaid in
March 2020. As at 31 March 2020 the Group's cash balances stood at
USD 77 million, of which USD 35 million is restricted. Challenges
in the traditional term debt segment persist as a result of
market-wide impact of the COVID-19 crisis and Lamprell is assessing
alternative project funding options.
We have commenced negotiations with the other IMI shareholders
regarding the deferral of the next instalment of our strategic
capital expenditure in the Saudi maritime yard currently scheduled
for this year.
Outlook
Bidding activity continues in both of our end markets of oil
& gas and renewables but we are seeing signs of deceleration
and delays in some awards. Given the macro environment uncertainty,
we withdraw our previously announced FY2020 revenue guidance. Our
2019 year end backlog stands at USD 470.1 million with
approximately USD 275 million scheduled to run off in 2020.
Further to the Financial Conduct Authority's (FCA) directive for
listed companies to defer release of their results due to the
ongoing impacts of COVID 19, Lamprell will confirm the date for the
release of its preliminary results for the year ended 31 December
2019 as soon as the reporting schedule has been finalised with the
Group auditors.
Christopher McDonald, CEO of Lamprell said:
"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. 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."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
- Ends -
Enquiries:
Lamprell plc
Maria Babkina, Investor Relations +44 (0) 7852 618 046
Tulchan Communications, London +44 (0) 207 353 4200
Martin Robinson
Martin Pengelley
Notes to editors
Lamprell PLC, based in the United Arab Emirates ("UAE") and with
over 40 years' experience, is a leading provider of fabrication,
engineering and contracting services to the offshore and onshore
oil & gas and renewable energy industries. The Group has
established leading market positions in the fabrication of
shallow-water drilling jackup rigs, liftboats, land rigs, and rig
refurbishment projects, and it also has an international reputation
for building complex offshore and onshore process modules and fixed
platforms.
Lamprell employs more than 4,000 people across multiple
facilities, with its primary facilities located in Hamriyah,
Sharjah and Jebel Ali, all of which are in the UAE. In addition,
the Group has facilities in Saudi Arabia (through a joint venture
agreement). Combined, the Group's facilities cover approximately
828,000 m2 with 1.6 km of quayside.
Lamprell is listed on the London Stock Exchange (symbol
"LAM").
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