It was late November 2014 when Amec finally secured a controlling interest in global engineering conglomerate Foster Wheeler. The business contributed £274m to Amec's revenues during the last seven weeks of the year, but it's far too early to assess the full impact of the deal. Still, the newly merged entity, Amec Foster Wheeler (AMFW), turned in full-year results that were broadly in line with expectations. Trading profits came in at £321m - down 6 per cent on 2013 as margins contracted 70 basis points to 8.2 per cent.
Net earnings were hit by a £138m post-tax charge linked to the merger and the disposal of an interest in a Lancashire Waste project. It’s also worth noting that the group has included a net provision of £407m in the balance sheet to cover asbestos-related lawsuits and out-of-court claims.
The group continued to see solid growth in both its clean energy and Middle Eastern oil and gas markets, but weakness in the US and Europe dragged on profitability - not helped by £238m in negative currency effects due to the strength of sterling. Looking ahead, the currency effect should reverse: management expects a strengthening US dollar to add about £150m to the top line next year. They have also increased their cost savings target from the acquisition to £125m.
Amec Foster Wheeler, which again raised its full-year dividend, faced a marked decline in commodity prices during the second half. Capital budgets across the extractive industries were already in decline, but the price falls have accelerated the pullback. As a consequence, revenues from the group's oil and gas and mining engineering segments were down 13 per cent and 14 per cent, respectively.
Shareholders can take encouragement from the improved performance of the clean energy businesses, though. These benefited from support work at EDF's nuclear power stations in the UK and ongoing clean-up work at the Sellafield site. Midway through the year the group was also awarded two multimillion pound framework contracts by National Grid (NG.) for the refurbishment and installation of power lines and cables across England.
Société Générale maintained its discounted cash flow valuation of 1,084p a share.
| AMEC FOSTER WHEELER (AMFW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 972p | MARKET VALUE: | £3.8bn | |
| TOUCH: | 972-973p | 12M HIGH / LOW: | 1,271p | 775p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 513p* | NET DEBT: | 40% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 2.95 | 259 | 73.0 | 30.5 |
| 2011 | 3.30 | 259 | 63.3 | 30.5 |
| 2012 | 4.01 | 254 | 65.2 | 36.5 |
| 2013 | 3.97 | 255 | 63.8 | 42.0 |
| 2014 | 3.99 | 155 | 36.1 | 43.3 |
| % change | 0.5 | -39 | -43 | +3 |
Ex-div: 28 May Payment: 2 Jul *Includes intangible assets of £3.3bn, or 854p a share. | ||||
