AMEC plc (AMEC) Ordinary 50p Shares

First quarter trading update: In a short statement, management highlighted that trading had remained in line with its expectations. Good growth for its important Oil & Gas customer segment had been enjoyed. New contract awards, such as a £68 million services contract for BP and partners' two new Clair Ridge platforms had been won, boosting North Sea activity in particular. In addition, acquisitions made in 2012 were integrating well, with the pipeline of further acquisition opportunities remaining good.

Nonetheless, whilst management highlighted that it remained on track to achieve targeted Earnings Per Share (EPS) of greater than 100 pence ahead of 2015, it also left its profit guidance given at the February (2013) full year results unchanged. On balance, despite an injection of caution given by management back at the February full year results, given expected growing demand for energy and required services needed to deliver it, analyst opinion continues to denote a buy.

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Negative Points:

• Previous accompanying management outlook comments generated investor caution. Low-to-mid single digit revenue growth on an underlying basis for 2013 was forecast, along with more modest clean energy and environment & infrastructure growth and lower oil sands activity.
• The order book remains virtually flat - £3.7 billion (December 2012: £3.6 billion).
• At the full year results, some disappointment that a new share buy-back programme was not announced appeared to be generated. 
• Engineering firms rely heavily on their implementation track record to win new business. Association with an industrial accident or faulty implementation could impair AMEC's ability to compete for new business.
• AMEC operates in areas which can be politically sensitive such as nuclear, oil sands, and unconventional oil and gas. While AMEC's broad client base provides diversification, a sharp shift in policy may impact on future profits.
• Currency movements continue to pose potential headwinds.
• The group is exposed to project risk in the form of poor cost projections or project delays that could impact earnings.

Positive Points:

• Trading for the year to date remains in line with management expectations.
• A 20% hike in the total dividend payment for the year compared to the prior year was previously announced. The board expects to maintain a progressive policy.
• Acquisitions made in 2012 were highlighted as integrating well, with a pipeline of further acquisition opportunities remaining positive. The group invested £159 million in three acquisitions in 2012. The largest was Serco's 600-person nuclear business, Energy Safety and Risk Consultants (ESRC), based in the UK. The second was Unidel, a 260-person energy, resources and infrastructure engineering and consultancy business in Australia. AMEC also acquired a 50% stake in Kromav Engenharia Ltd, a 200-person privately owned Brazilian offshore oil and gas and marine engineering company.
• Management previously announced a new geographic organisation structure. This simplified structure is designed to enable greater collaboration with faster, more efficient decision-making. The goal is to maximise growth opportunities in each of AMEC's four markets (oil & gas, mining, clean energy and environment & infrastructure) across its three geographies.
• Currency movements can work in the company's favour.
• Diversification in both business type customers and geographies operated in is currently enjoyed.
• The group remains on track to achieve targeted EPS of greater than 100 pence ahead of 2015.

All yield figures are variable and not guaranteed.