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AMEC's share price has been victim of recent market volatility
As with other resource sector stocks, the share price of AMEC Plc (LON:AMEC) has been victim of recent market volatility. The stock has been de-rated despite producing a robust set of interim results. Indeed, AMEC’s order book remains active with firms such as Shell and Suncor (an oil sands firm) continuing to invest and boost output on the expectation of growing oil demand.
Turning to the results and AMEC saw underlying revenue growth (excluding currency and acquisition impacts) of 2% in H1. This means that the group has continued to grow revenues as it did in FY 2010 when underlying revenues rose by 8%. In 2009 AMEC did see a revenue fall of 12% but this was after oil prices had fallen from over US$140 to around US$40 in around six months.
As a result of recent falls AMEC is rated at around 11X earnings for 2012, which falls to around 9.8X for 2013. This is as the group has a strong order book, a robust net cash position to make acquisitions and provides exposure to the growing resources demand. Part of AMEC’s “Vision 2015” plan is to reach a target of 100p earnings per share by 2015. Clearly this puts the group on a low rating a few years out suggesting that if it can be met the stock will perform well.
Turning to the first half financial performance in more detail and the underlying revenue growth of 2% translated into reported revenue growth of 4%. This was as acquisitions provided a 3% boost but currency effects reduced the figure by 1%.
EBITDA and profits before tax both rose by 9% with a slight margin improvement helping results. Importantly the profits increase was in the existing business as underlying EBITDA profits rose by 8%.
The substantial 40% increase in the dividend is particularly notable and moves the yield of the group for the current year to about 3.3% (the stock goes ex-dividend in November). Further dividend growth is expected which would generate a yield of around 3.7% for 2012.
On an operational basis the growth ambitions of the group are highlighted by the 12% increase in employees on a year ago. The order book did fall marginally on a year ago but this is still more than twice yearly revenue and should grow in the longer-term and it is up on the figure at the end of 2010 (£3.1bn).
The group completed four acquisitions in the first half at a cost of £261m. However, net cash at the end of the period came to £455m which although down on last year (£699m) provides scope for further acquisitions and a progressive dividend policy in line with the group’s Vision 2015 objectives.
