Amec Drops After Saying Expects Lower 2014 Revenue Growth

Amec Plc, the U.K.’s second-biggest oil and gas engineer, fell after reporting lower first-half profit and cutting its revenue growth forecast for the year.

The shares slid 0.6 percent to 1,083 pence in London trading. That’s the lowest close since March 19.

Earnings before interest, tax and amortization declined to 152 million pounds ($256 million) in the six months ended June from 159 million pounds a year earlier, the London-based company said today in a statement. It raised its dividend to 14.8 pence a share even as revenue decreased 7 percent to 1.85 billion pounds.

The results were “lackluster,” Investec Bank Plc analyst Neill Morton said in a note to clients. “Given the weaker-than-expected revenue performance in the first half, Amec has lowered its revenue guidance from good underlying growth in 2014, that is mid-to-high single digit, to modest growth or low single-digit,” he said. Morton has a hold rating for the shares.

Currency fluctuations will drag full-year revenue down by about 250 million pounds and Ebitda by about 25 million pounds, according to the statement. It had a 160 million-pound impact in the first half because of the strength of the pound.

“We now expect to see modest underlying revenue growth in 2014 for our existing operations,” Chief Executive Officer Samir Brikho said in the statement. “A 10 percent increase in the interim dividend signals our belief in the underlying strength of Amec.”

Continued Weakness

The company reported a slowdown in conventional oil and gas and continued weakness in oil sands in its North American business. The mix of businesses will result in a “slight reduction” in full-year margins, it said.

Amec, which agreed to buy U.S.-traded Foster Wheeler AG earlier this year to expand its geographic footprint, won contracts including in the North Sea, and was the preferred bidder for Poland’s first nuclear power plant. The Foster Wheeler deal is expected to close in the fourth quarter, Amec said today.

The order book was up 16 percent to 4.2 billion pounds.

“The order book suggests that demand across the business remains robust but some areas of weakness in the first half mean achieving full-year expectations will be a stretch,” Deutsche Bank AG said in a note.

(Updates with closing share decline in second paragraph.)
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