Lamprell – getting rigged up for digital renewal

Oil & gas services business Lamprell looks primed for renewal and recovery, writes Mark Watson-Mitchell.

The Strategic Reorganisation and Trading Update statement made a week ago by Lamprell (LON:LAM), brought to my attention the group’s attractions.

Based in the UAE the company, which employs some 4,000 people, has built up over the last 45 years to today being a leading provider of fabrication, engineering and contracting services.

Its business is focussed upon the offshore and onshore oil and gas sector. It is also an important supplier of fabrication services to the renewables industry.

Three new business units

A main structure of the reorganisation strategy announced last week is to increase its focus upon renewables and the energy transition. At the same time, it announced that it was splitting its business into three new units: Renewables, Digital and Oil & Gas.

Renewable

The group, since 2017, has fabricated over 100 wind turbine generator foundations for the UK’s flagship offshore wind farms, accordingly serial production for renewables projects has become a core area of its expertise. It is also considered to be a driver for the group for the next decade, at least. 

Currently it has some $2.5bn of renewables opportunities in its bid pipeline, some 40% of the total being tendered for across the group as a whole.

It believes it has a strong position to access the expansion of offshore wind globally, which is an industry that is forecast to see some $300bn of capital expenditure over the next five years alone.

Digital

On the digital side the group is looking to capitalise upon the technology and IP development that it has used in its yards, such as adaptive robotic welding, facial recognition technology and digital management systems. 

It aims to provide a differentiated digital offer applicable to clients in its core markets and beyond.

Oil & Gas

The group’s traditional oil and gas business has been its core activity, centred around rig fabrication and refurbishment. It has some of the world’s major players in the sector as its customers. 

As this sector recovers the group is expecting it to remain a significant part of its bid pipeline.

Organisational restructuring to pay off

The group in the last few years has been undergoing a bit of a ‘rethink’ about its business – this reorganisation of its corporate strategy is the response.

In the year to end December group sales were $260.4m ($234.1m), upon which it reported a thumping loss of $105.1m ($69.5m).

However, analyst Daniel Slater at Arden Partners reckons that sales will have increased to $340m for last year, generating a much smaller loss of just $33.2m.

Going forward into this current year he is already estimating a massive uplift in revenues to $470m and a halving of those losses to only $17.4m. He noted that the group’s order book was $520m as at the end of 2020. 

Furthermore, he states that the group’s bid pipeline is now a very useful $6bn of possible business.

Some very interesting shareholders

There are some 341.7m shares in issue, of which the larger holders include Lamprell Holdings (33.12%), Blofeld Investment Management (22.08%), Schroders (15.03%), Lombard Odier Asset Management (7.13%), and Massachusetts Financial Services (4.66%).

As a matter of interest both Blofeld and Schroders have recently increased their stakes by a couple of points, while Lombard Odier has more than quadrupled its stake since last September. That was when the shares were as low as 21p, they now trade at 67p in an obviously tightening equity.

Rebirth to push profits

Although it is still a big loss-maker I have not been at all put off in presenting this profile of the company. It is still early days in the rebirth of its structure, but I am hopeful that it will work out.

Hopefully, we will get even more information from the company when it reports its final results for the year to end-December on Thursday 25 March.

100p price magnet

I am not sure whether we will ever witness the shares recover to their peak of 462p seen in June 2008. However, I now set a target price of 85p over the next couple of years, with that magic 100p being an inevitable price magnet.