Bottom Line: Amec's sour notes

IT CAN be no real surprise that the construction sector's outperformance since last September has ground to a halt. Apart from the need to let reality catch up with expectations, there are seasonal factors at work. The approach of the September interim reporting season and the thump on the doormat of last year's report and accounts can both be worrying.

Take Amec - an object lesson in the need to dig into the meat of the notes to the accounts. A close look at the 1992 accounts reveals that, but for some perfectly legal jiggery-pokery with its reserves, the company, even after tapping shareholders for pounds 111m in March 1991, would have been unable to pay last year's drastically reduced dividend.

Arguably Amec is right to say that its decision to restate subsidiary investments at cost less write-offs rather than net asset value is merely a matter of presentation.

But how convenient that it threw up pounds 70m, which, when parked in the profit and loss account, prevented last year's loss creating a deficit on distributable reserves.

If one of the sector's more robust players had to resort to these manoeuvres, what hope is there for some of the more rickety outfits? It is a timely reminder that September's figures are unlikely to make happy reading and a warning that the stock market is looking a long way into the recovery.

Amec's shares, 87p yesterday, have lost some ground since April but they have still outperformed the FTA-All Share by 25 per cent this year. That makes them vulnerable ahead of a likely cut in the interim dividend, designed to rebalance the annual payouts.