In what is now the 4th profit warning for Lamprell this year, investors in the stock must be scratching their heads as to just what is going on at Board level. It seems management do not know precisely what is happening in their company.
Increased losses on various of their contracts are announced this morning with a negative impact on this years numbers resulting in a likely EBITDA loss of around $64m – “significantly” greater than projected aswell as a likely flat 2013.
Here are the high (“low) lights –
Completion of review of major projects by external consultants validating the Group’s revised financial position
Projected losses for the full year 2012 increase significantly, with a gradual return to profitabilityduring 2013
Progress made in making new appointments to the Board and strengthening the management team
Initial management actions to enhance project control and improve broader risk management
Discussions continue with lenders to obtain awaiver of certain of its year-end banking covenants and a reset of applicable covenants in Q1 2013
The last sentence in particular is worrying in light of the increased losses forecast and it is by no means certain that the banks will waive the covenants despite what management say (“The Group remains confident of support from its lenders during this challenging time for the business”). A capital raising cannot be ruled out into 2013 in our opinion. We made Lamprell a Trading Buy on the 3rd Oct at 74p and will take the opportunity to close out the position at the very first opportunity at the open this morning. Confidence has been lost in the new management.