Amec’s full-year results were almost exactly in line with consensus stock market forecasts for revenue, operating profits and earnings per share (EPS).
Turnover from existing operations was around 11% higher, highlighting the continued demand for engineering services in what is still an incredibly buoyant oil and gas market.
Given the success of the results, the management team at Amec has announced a significant increase in the dividend, 15% higher than analyst expectations, with total dividends per share up to 30.5p from 26.5p in 2010. Furthermore, Amec has also announced a plan to return money to shareholders via a share buyback scheme using around £400million of the available cash on the balance sheet, in line with management’s plan to return excess cash if they were unable to find any suitable acquisition targets.
A buyback scheme is a cost-effective method of returning cash to shareholders by simply buying back shares in the equity market for cancellation thus reducing the number in public circulation and thus improving ratios such as EPS.
We expect revenue to continue to grow strongly in 2012, despite the ongoing economic uncertainty throughout the world, thanks to a strong pipeline of business, however overall margins are expected to reduce somewhat impacted by a shift in business mix and an increase in procurement activities over the next few years.
Amec’s shares have performed exceptionally well over recent months although are down slightly from their high of £12.07 last May.
Alan MacPhee is an investment manager at financial planning and wealth-management specialist Brewin Dolphin in Aberdeen