Tuesday, Aug 28, 2012

-- Company to accelerate restructuring, integrate acquisition

-- Reschedules supply deliveries to mitigate delays

-- Swings to first-half loss on contract delays, operational issues

-- Suspends dividend for first half and full year

(Rewrites adding chief executive's and finance director's comments, detail and updated share price.)

By Iain Packham

LONDON--Oil rig engineering company Lamprell PLC (LAM.LN) sees 2013 as a year of transition, as it seeks to accelerate the integration of a large acquisition and restructure its operations, after supply chain and operational issues dragged it to a first-half loss and are likely to lead to a loss for the full year, its directors said Tuesday.

The company has agreed new delivery schedules with a key jack-up rig supplier, LeTourneau Technologies Drillings Systems, whose takeover by Cameron International late last year resulted in delayed shipments that affected project startups and "caused out-of-sequence construction and poor utilization of labor," Lamprell Chief Executive Nigel McCue told Dow Jones Newswires.

"Bottom line is, it's all in hand, we're receiving the equipment on schedule. What we have done also is engage parties in the U.S. to check on those deliveries for us first hand," he said.

Lamprell also plans to restructure the operations and engineering sides of its business, after delays to the delivery of two offshore wind-turbine installation vessels--known as the Windcarrier 1 and 2 projects--resulted in gross contract losses amounting to $46.2 million in the first half.

"In view of the difficulties, and also the difficulties over the two Windcarrier projects, what we're doing is completely reorganizing the operations side of the business," Mr. McCue said.

"Also [on] the engineering [side], we've appointed a new VP [Vice President] engineering, who is extremely experienced, along with a number of other people behind the scenes, to give project managers more authority. With it goes more responsibility and accountability, so actually, behind the scenes, quite a comprehensive reorganization."

Mr. McCue attributed the Windcarrier projects' losses to Lamprell's fast growth and lack of operational integration, citing the expansion of its Hamriyah construction facility in the United Arab Emirates and the company's 208.1-million-pound ($329 million) acquisition last year of diversified engineering and contracting group Maritime Industrial Services.

The delayed shipments from LeTourneau and delays to the Windcarrier projects "have accelerated those organizational changes that we were already starting to make," Mr. McCue said.

He said he expects the reorganization to result in cost savings in the longer term. "We'll look at saving $15 million to $16 million next year, so it will actually have a positive impact on the bottom line," he said.

Despite the delays, the first-half loss and anticipated full-year loss, which have led the company to suspend paying dividends for 2012, Mr. McCue is optimistic about Lamprell's prospects.

He said the company's order book totals around $1.5 billion, up from $869 million last year, after Lamprell secured about $750 million worth of contracts in the first half, and it still has a bid pipeline of about $4.4 billion.

"From the company's point of view, historically, its probably one of the best positions we've been in," he said.

He expects a work backlog of about $725 million in 2013, of which a good proportion is already contractually covered, partly due to the delays from supplier LeTourneau.

Earlier Tuesday, the company said it swung to a first-half net loss of $47.1 million from a profit of $18.6 million a year earlier. Revenue rose 38% to $528.1 million from $383.6 million.

Having scrapped dividends for 2012 in light of the losses, Chief Financial Officer Jon Cooper said the 2013 dividend will be "under consideration based on performance and various funding needs."

Bank debt fell to $35.7 million from $101.7 million.

At 1010 GMT, Lamprell's shares were flat at 90.0 pence, in a slightly lower FTSE Small Cap index--down 0.1%.

Write to Iain Packham at iain.packham@dowjones.com

(END) Dow Jones Newswires

28-08-12 1103GMT