Petrofac impairs yet again

In Numis’s view, the blandness of December’s trading update was a good thing, after unexpected write-downs at the time of prior announcements in 2015 and 2016. Unfortunately, Petrofac merely moved the timing of $372m-worth (£272m) of exceptional items and asset re-measurements to results day. The body blows came in two bursts: a $176m post-tax impairment charge triggered by the decision to exit the deep-water market, and a $179m hit to the integrated energy services business.

Exiting the former – in the name of reducing capital intensity and enhancing returns – has not dented the tendering pipeline. That remains robust, although with $8.5bn of the backlog set to be booked by the end of next year – and revenue visibility no longer ‘excellent’ – Petrofac will hope to boost the engineering and construction division’s 21 per cent tendering success rate in 2017. All told, not quite the “positive operational momentum” seen by Numis.

There were a couple of bright spots. Cuts to capital expenditure and better-than-expected working capital flows at least meant that year-end net debt of $0.6bn came in below market expectations, and Petrofac’s pre-close guidance. Numis, which has set a 700p target price, expects adjusted EPS of 95.9¢, against a 104¢ forecast for 2017.