Investment: Amec services boost shares
Friday 04 September 1998
Yesterday, Amec pointed out that two-thirds of total first-half operating profits of pounds 26m came from services, which range from providing facilities management for North Sea oil platforms, to maintenance contracts for Railtrack.
Investors promptly boosted the shares - which have suffered from the general gloom about an economic slowdown - 10p to 149p.
This is no surprise. Stock markets like steady, dependable earnings streams and they don't get much more predictable than facilities managements contracts - which traditionally run for several years. That said, investors should not get too carried away. Amec's rail-maintenance contracts are coming up for review and, although the company hopes to win market share, it may be forced to accept lower margins to beat its rivals.
What's more, Amec's success in services only serves to show how poorly it is still doing in the other parts of its business. Profits from capital projects were just pounds 5.3m in the half year (Amec did not provide comparative figures for last year) while housing and investment projects contributed just pounds 3m. Given that Amec turned over pounds 1.72bn - an increase of 14 per cent - in the period, there is still a lot to do.
That said, chief executive Peter Mason deserves credit for tackling loss- making divisions and shifting Amec's focus away from risky, low-margin projects. A few businesses, such as housebuilding, sit uncomfortably with the rest of the company. But in the case of an economic slowdown Amec should be relatively protected. On a forward earnings multiple of just nine, the shares are good value.
- 1 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 2 Watch what happened when food critics were unknowingly served McDonald's
- 3 David Beckham's Haig Club whisky is exactly what’s wrong with the Highlands
- 4 Queen's first tweet: Reply telling Her Majesty to 'f*** off' broadcast on BBC News
- 5 #AskNigelFarage: Twitter starts hilarious Q&A for Ukip leader
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Tony Blair 'says Ed Miliband will lose 2015 general election'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Putin: The US is to blame for almost all the world's major conflicts
Poppy Appeal 2014: This is why I won't be wearing a red poppy this year
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...