Shares in AMEC (LSE: AMEC) dropped lower in early trade this morning, following a mixed bag of news from its half-year results.
While revenue remained stable at £1,998m and EBITA margins improving by 40 basis points to 7.9% (2012: 7.5%), with management keen to highlight a “solid” set of results with trading “in line with expectations”, there were a number of key blows within the statement.
First, the engineering firm’s full-year revenue is anticipated to be in line with 2012, having previously forecast low-to-mid single digit growth. It is thought that the global mining slump has hit AMEC’s services, with Reuters quoting chief financial officer Ian McHoul as saying: “”Mining was down 25 percent and we’re not seeing very much cause for change in the second half.”
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Secondly, the man in charge of AMEC’s emerging markets is to step down, citing personal reasons. Dr Hisham Mahmoud, president of Growth Regions, has overseen progress in the Middle East, Africa and Asia-Pacific, while he was at the centre of AMEC’s contract win in Kuwait which, when completed, is set to become the Middle East’s biggest oil refinery. Dr Mahmoud’s departure will be the second high-profile executive to leave the company in the last year, following ex-COO Neil Bruce’s resignation in light of organisational restructurings.
Pre-tax profit fell by 2% to £117m from £120m at H1 2012, while operating cash flow sunk 60% to £56m, mainly due to “short-term timing effects in working capita”l, and also “unusually high cash flow in the first half of 2012”.
Elsewhere in the update, though, AMEC reported a strong order intake and record order book, while a multi-million dollar contract with Sempra U.S. Gas & Power was announced, to design and construct its Copper Mountain Solar 3 project near Las Vegas. Management pointed towards “the usual seasonal uplift” in the second half, where margins are expected to be stronger.
AMEC revealed a 15% boost to its interim dividend — rising to 13.5 per share — in line with AMEC’s progressive dividend policy, to yield a consensus estimate of 3.4%, while additional cash returns to shareholders will be “considered in the fourth quarter… depending on [the] progress on acquisitions”.
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> Sam does not own shares in AMEC.
