Profit before tax drops 39% at engineering giant Amec Foster Wheeler plc

Global business, which completed a major acquisition in 2014, is taking action to protect itself against the impact of falling oil prices

Samir Brikho, Amec chief executive
Samir Brikho, Amec chief executive

Weak commodity pricing and costs involved in major acquisitions have hit Amec Foster Wheeler’s profits.

The engineering plc, which lists Darlington, Newcastle and North Shields among its worldwide sites, saw profit before tax drop by 39% in 2014, plummeting from £255m the previous year to £155m.

Full year results also show cash flow from operations decreased 32% to £200m, while revenue remained roughly stable at £3.99bn.

The update comes following Amec’s acquisition of Foster Wheeler AG, the business taking a 95.3% controlling interest in the international engineering, construction and project management contractor on November 13, 2014.

In January, 2015, then, it acquired the remained 4.7%, the process incurring significant exceptional costs.

On December 15, 2014, the group also acquired the entire issued share capital of Scopus Group (Holdings) Limited for £68m in cash, of which £67m was paid on completion and a £1m was deferred for one year following completion.

Amec Foster Wheeler designs, delivers and maintains strategic and complex assets for it customers across the global energy and related sectors.

With over 40,000 employees in more than 50 countries, it operates across the whole of the old and gas industry, from production through to refining, processing and distribution of derivative products.

The group is also involved in the mining, clean energy, power generation, pharma, environment and infrastructure markets.

According to a report accompanying the latest results, the fall in oil prices has impacted on the investment behaviour of the group’s customers in this sector, with pressure on capital expenditure now leading to a greater focus on smaller project and operating expenditure.

The risk is being mitigated by maintaining a balanced business portfolio of geographies, markets, clients and service offerings, as well as by improved efficiencies through increased workflow between offices and the effective use of centres of excellence and High Value Execution Centres.

Amec Foster Wheeler chief executive Samir Brikho said: “I am pleased to report that we have delivered 2014 results in line with expectations.

“Looking ahead, I believe our low-risk multi-market model, combined with the additional benefits from our integration and cost savings programmes, is a strong platform from which to create long-term value for shareholders.

“For 2015, we expect to see a continuation of recent trends - with growth in clean energy, downstream and Middle Eastern oil and gas markets offsetting tougher conditions elsewhere.

“The mix of performance, together with the increased customer pricing pressure and cost saving plans, is expected to lead to a modest reduction in like-for-like trading margins.

“On current forecasts, the reversal of the current headwinds we experienced in 2014 will add approximately £150m to scope revenue.”

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