To be fair, order intake of oil service companies is usually volatile and it is hard to forecast when billion-dollar contracts will land. But Petrofac is more exposed than most. Many of its customers are the national oil companies of the Middle East, where bureaucracy and delay seem to be getting worse. Alas, it was unable to mitigate the pain by unveiling new big contract wins yesterday, although it remains confident of boosting its order backlog this year.
Petrofac insists there is no read across from the woes of Saipem, who recently forecast an 80 per cent profits slump. It is true that many of the Italian group's problems are self-inflicted, but the two have more in common than Petrofac would like to admit, with both active in Algeria, Iraq and elsewhere in the Middle East. Hence the big disappointment caused by the company's vague guidance for 2013. To meet its 2015 target, it needs to lift net profits by 11 per cent year on year. Analysts had pencilled in double-digit profit growth, but Petrofac was able to promise only "good growth." The company also reported a slight softening in margins in two key markets last year, although it can still boast a healthy group margin of 12 per cent. Petrofac should still do enough to meet its 2015 target, but it's getting harder all the time, The Times' Tempus argues .
Investors got a bit jittery with Petrofac's outlook statement yesterday, as City analysts regarded its 2013 guidance as too vague. Add to that some analysts' concerns over a proposed $1bn (£660m) outlay on equipment for deep-water operations and a recipe for a sell off was created. The Telegraph's Questor thinks the market overreacted. However, Petrofac maintained its long-term guidance to more than double 2010 group earnings by 2015. This would imply an average increase in earnings of more than 11 per cent each year. In the year to December, revenues rose 9 per cent to $6.3bn and pre-tax profits rose 12 per cent to £765m.
The final dividend, which will be paid on May 24th, is 43 cents, bringing the total to 64 cents, an increase of 17 per cent. Concerns remain that the stock market is defying gravity. Andrew Garthwaite, Credit Suisse's global equity strategist, said yesterday that he expected a period of "consolidation" was ahead, but was optimistic about the longer term. This means he expects markets to fall in the near term. The shares are trading on a 2013 earnings multiple of 11.1, falling to 9.8 next year. Yesterday's fall looks overdone, so Questor keeps a buy rating despite wider market concerns (Last IC rating: Hold, 27 Feb).
Not so long ago, Chris Christie, the Governor of New Jersey, was voted the most popular Republican in America. Now, the roly-poly politician stands a better than evens chance of being named the most popular politician by the internet gambling industry. While the odds of the US Department of Justice reversing its 2006 ban on cross-border gambling are zero, the legalisation of some forms within state borders is encouraging. Given the threadbare nature of many states' finances, it is safe to assume this will presage a wider opening - over time - of other states keen to boost taxes. While licences will go to incumbent land-based operators, the need for online expertise has already seen alliances forged with the UK-listed Bwin.party (Last IC rating: Buy, 13 Nov) and 888 Holdings (Last IC rating: Hold, 29 Aug). This is a notoriously unpredictable market, but both groups are in pole position to profit from US regulation. Stick, Tempus in The Times says.
Business press headlines:
Shell last night announced it had shelved its controversial Arctic drilling plans after a series of failures in the quest for fresh oil supplies. The energy giant said it would halt exploration activity for 12 months in Alaska's Beaufort and Chukchi seas to 'prepare equipment and plans for a resumption of activity at a later stage'.
The company's £3bn campaign to discover oil was last year subject to a review by the US Interior Department, which said its findings would influence future decisions to issue permits to drill in the region. One of Shell's two drilling rigs, the Kulluk, was damaged after strong weather conditions. Environmental campaigners celebrated the announcement. "Shell's multi-billion dollar Arctic investment lies in tatters, and so does the company's reputation," said John Sauven, the executive director of Greenpeace. [The Independent]
Bankers in Europe face a cap on bonuses as early as next year, following agreement in Brussels to introduce strict new curbs, in a move politicians hope will address public anger at financial sector greed. The agreement, announced by diplomats and officials after late-night talks on Wednesday between EU country representatives and the bloc's parliament, mean bankers face an automatic cap on bonus payouts at the level of their salary. If a majority of a bank's shareholders vote in favour, that ceiling can be raised to two-times pay, Reuters reported. [The Telegraph]
First attempts to find a way out of Italy's political deadlock have suffered an early setback after a proposal by the centre-left Democrats to form a minority government following inconclusive elections this week was effectively killed off by the leader of the anti-establishment Five Star Movement. Beppe Grillo announced on Twitter on Wednesday that his movement would not give a vote of confidence in parliament to a government led by either the centre-left or Silvio Berlusconi's centre-right party. [Financial Times]
An aggressive £400 million tax avoidance scheme created by the men behind a massive charity tax scam has been shut down by the courts. NT Advisors, which sold the Cup Trust tax scam exposed by The Times last month, also devised the Highlands scheme that was used by 305 wealthy individuals to claim tax relief totalling £391.8 million. Highlands created artificial losses that clients could use to shelter income by funnelling money through tax havens including the Isle of Man, Luxembourg, Gibraltar and Jersey. It was shut down after a judge found that it was "a tax avoidance scheme with no underlying purpose whatsoever". Last night the Treasury described Highlands as an affront to ordinary taxpayers. [The Times]
The steady rate of high street closures turned into a torrent last year, according to new figures revealing the toll that the financial crisis has taken on town centres. Modest growth in the number of independent stores was not sufficient to counter the steps being taken by big retailers to close stores or move out of town. Research on Britain's top 500 town centres by PwC, the accountancy firm, and the Local Data Company shows that last year companies shut 1,800 more shops than they opened, compared with 174 net closures in 2011. Total daily closures rose to 20 a day, from an average of 14 in 2011. [The Times]
David Cameron pledged to go "further and faster" in reducing the deficit after the UK was stripped of its coveted AAA credit rating. The prime minister insisted that the one notch cut to the debt rating was a reason to press ahead with balancing the public finances, despite claims by the Labour leader, Ed Miliband, that the UK now had a "downgraded government, a downgraded chancellor and a downgraded prime minister". [The Guardian]
Haruhiko Kuroda, president of the Asian Development Bank, has been confirmed as the government's choice to become the next governor of the Bank of Japan, as Prime Minister Shinzo Abe seeks a more aggressive regime to overturn more than a decade of growth-sapping deflation. On Thursday Mr Abe also announced two nominations for deputy governor: Kikuo Iwata, an economics professor at Gakushuin University in Tokyo, and Hiroshi Nakaso, currently in charge of international affairs at the BoJ. [Financial Times]
Insurance tycoon Peter Wood is targeting a £1 billion price tag after unveiling plans to float his Esure venture on the London Stock Exchange within weeks. The home and motor insurance group, which employs more than 800 people at its main customer-facing operations base in Glasgow, will clear its debts with £50 million of new share capital while its owners will sell up to half their stake in an initial public offering (IPO) expected to complete before the end of March. [The Scotsman]
