Thursday, 10 March 2016

Amec Foster - Full Year Results

Amec Foster Wheeler are a FTSE 250 company with a market cap. of ~ £2bn. It's main markets are in the energy services and engineering sector, with major operations centers based in the UK and Americas and offices and projects in around 40 countries worldwide.

Its goal is to deliver profitable, safe and sustainable projects and services for their customers in the oil and gas, mining, clean energy, environment and infrastructure markets, including sectors that play a vital role in the global and national economies and in people’s everyday lives.

Customers, in both the private and public sector, are among the world’s biggest and best in their fields - BP, Shell, EDF, National Grid and U.S. Navy to name just a few.

They have today released results for the full year to 31st December 2015 (link via Investegate). The dramatic fall in oil and commodity prices has obviously had an impact on earnings and profits.

Adjusted profits are down -7% at £374m - earnings per share of 67.7p (from continuing operations) down -15% on the previous year.

Amec announced plans to sell its Global Power Group unit and halve its net debt in the next 15 months through non-core disposals.

CFO and acting CEO, Ian McHoul said
"Our focus is to maintain our solid operational performance and drive our cost reduction and efficiency programmes. We are also making good progress with our portfolio review, and have identified a number of non-core assets, including GPG, which we intend to sell over the next 15 months. We are targeting to halve our net debt over this timeframe, from disposal proceeds together with the cash generated from our core businesses. The successful refinancing we announced last week further strengthens our position.

"2016 is expected to be another year of challenging market conditions across upstream Oil & Gas and Mining. However, our exposure to a number of end markets, including downstream Oil & Gas, renewables and government work means we expect to see only a slight fall in like-for-like revenue, and a reduction in trading margins significantly less than the decline in 2015"

The company recommended a final dividend of 14.2p per share, which together with the interim dividend of 14.8p takes the total dividend to 29p, down from 43.3p in 2014.

3 yr price chart (click to enlarge)

As can be seen from the chart, the share price has fallen over 50% in the past 18m or so. Combine this with a 33% reduction in the dividend and it is not a welcome picture for the small shareholder. However the results are not as bad as some expected and if they manage to reduce the debt arising mainly from the acquisition if Foster Wheeler, and there is an upturn in the oil and engineering markets in the coming year, I think this could be an excellent recovery play. I will therefore hold for the time being and await further progress.

At the time of posting, the share price is up ~6% at 490p giving a yield of 5.9%.


  1. Hi John, this is actually my top-rated stock at the moment on a valuation basis, but the debt levels are just too high so I haven't invested yet. As you said, if they can get the debts down then it may all work out very well, but that's a big if.

    1. Good to hear its at the top of your list. Fingers crossed they can deliver on the pledge to halve the current debt and the oil price continues to recover. As with many of these situations, I think the sp drop has been overdone but it may take a little time for the current value to be reflected - which is why I plan to hold for the time being.