AMEC plc Ordinary 50p Shares (AMEC)

Company overview

The Group's principal activity is providing consultancy, engineering and project management services to the energy, power and process industries. It designs, delivers and maintains strategic and complex assets for its customers. The Group operates through four businesses. Natural Resources, Power and Process, Earth and Environmental and Investments. AMEC employs around 20,000 people and operates in more than 30 countries.

HL Comment (25 August 2011)

The group's half year results (25August2011) proved to be broadly in line with analysts’ forecasts. Total group revenue rose by 4pc to £1.48 billion, while adjusted earnings rose by 9pc to £122m. The order was expanded over the half year, but declined marginally on a full year basis - £3.4 billion (December 2010: £3.1 billion; June 2010: £3.5 billion). The results were driven by a strong performance in mining and power & process, whilst increased activity in the UK North Sea more than offset the anticipated reduction in activity levels within its oil sands business. The company also completed four acquisitions in the period, including the May purchase of US company MACTEC for $280m – management noted that the integration was progressing well. Accompanying management comments noted that ‘demand for its services and investment in its end markets remained strong, with the board now expecting contract awards to support future growth despite increased economic uncertainty.’

Negative Points

• Profit margins are expected to be maintained at about 9pc in 2011, not improved.
• The order book has declined on a year-over-year basis.
• Costs in relations to the ceasing of operations on Libya impacted during the period.
• The group remains exposed to the health of the global economy. A drop in energy prices could see customers cancelling investment projects.
• Currency movements continue to pose risks.

Positive Points

• The order book increased over the half year. Management noted that ‘order intake and forward visibility remained good’.
• The half year dividend was increased by 40pc to 10.2 pence.
• The group highlighted a 'strong balance sheet'.
• Further acquisitions remain a possibility.

Consensus

On balance, market consensus indicates a buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-12-2010	2,950.60	258.20	73.00	18.00	0.50	34.00	26.50	2.30
31-12-2009	2,539.10	203.50	47.60	16.60	2.80	6.00	17.70	2.20
31-12-2008	2,606.40	306.60	64.50	10.90	0.50	22.00	15.40	3.10
31-12-2007	2,356.20	151.60	36.90	22.70	0.20	116.00	13.40	1.60
31-12-2006	2,121.60	(27.00)	(13.30)	24.60	n/a	n/a	12.20	2.90