Rig refurbishment and construction specialist Lamprell (LAM) falls 9.7% to 134.5p despite announcing a return to the black for 2013 as it warns on 2014 and 2015 revenues.


We cited a lack of visibility when outlining our caution on the stock last September and today's release sees the company note: 'With lower recent order intake, revenues for 2014 and 2015 are expected to be slightly lower than 2013 while the group rebuilds its order book.'


This is not on the scale of some of the profit warnings the Dubai-based group delivered two years ago when it disappointed expectations on five separate occasions thanks to serious operational difficulties on a number of fixed-price contracts, eventually reporting a 2012 loss of $111 million. New management have since been installed and have stabilised the business.


Management attribute the lower order intake to delays to awards and a focus on project execution – the latter is something to be applauded but the market was always likely to deliver a de-rating in response to guidance for no sales growth for at least the next two years.


Looking at 2013's numbers – revenue is in-line at $1.1 billion and pre-tax profit is ahead of the $23.3 million consensus forecast at $40 million. The order book is down from $1.1 billion at the interim stage to $900 million but more positively the net cash position is up 76% year-on-year to $183.3 million.


Investec puts its 'hold' recommendation and 155p price target under review – noting that (based on today's opening price) the shares trade on a 2014 price/earnings ratio of 15.4, a 7% premium to its sector average. It comments: 'Good project execution and cost reduction were the key drivers of Lamprell’s recovery in 2013. However, delays in new orders amid tough competition from Asian players have meant that, while current year forecasts look achievable, there is currently downside risk to 2015E. Lamprell’s earnings may be depressed but its P/E premium versus the sector looks full, in our view.'


Issue Date: 26 Mar 2014