Amec has jumped more than 6% after the oil services and engineering group beat profit expectations, announced a 59% hike in the dividend, and said it would consider returning cash to shareholders if it could not find a suitable acquisition.
The company has been linked with its rival Wood Group, with analysts saying the recent £1.7bn sale of Wood's well support unit made it a better fit with Amec. Samir Brikho, chief executive, said the pipeline of potential acquisitions had strengthened but the company added:
If, over the course of the next 12 months, major transactions are not forthcoming and the balance sheet remains strong, consideration will be given to using the existing buyback authority or considering other one-off returns of capital.
Full-year profits rose 27% to £258.2m, and it said the growing demand for natural resources, power and water would help the company reach its target of earnings per share of more than 100p in 2015, compared with the current figure of 62.5p.
The news lifted the company's shares by 69p to £11.98, making it the biggest riser in a revived FTSE 100. Jon Bell at Shore Capital issued a buy recommendation, saying:
These are strong results with revenue, earnings, the operating margin and earnings per share all ahead of both our forecasts and consensus. The overall order book is marginally ahead at £3.13bn, reflecting strength in the natural resources division and further weakness in power and process (the latter attributable to reduced work from the National Grid in the US). The balance sheet remains strong with £740m of cash at the year-end.
While bolt on acquisitions have been made in the recent past, the overall pace of acquisition spend has disappointed some in the market, prompting some criticism that the company has missed the boat. We believe that the company has scope to make further bolt-ons, do a bigger deal or return cash to shareholders.
There is no explicit mention of any material impact from the group's operations in the Middle East, which represent a relatively modest proportion of overall revenues.
Caroline de La Soujeole at Seymour Pierce was also positive, upgrading the broker's 2011 full-year profit forecast from £285.7m to £302m and repeating its add recommendation and £12.50 target price.
With hopes of a peace deal in Libya following comments from the Venezuelan president, Hugo Chavez – a friend of Colonel Gaddafi – suggesting a commission to negotiate a deal, the market has recovered a little of its poise. The FTSE 100 is currently up 23.10 points at 5937.99, helped by overnight rises in the US and Asia. Later come US weekly jobless figures ahead of the non-farm payroll numbers on Friday.
BSkyB has bounced 17p to 816p after the UK accepted News Corporation's proposals to alleviate competition concerns surrounding its proposed takeover of the satellite broadcaster. This principally involves spinning off Sky News but guaranteeing it carriage rights for at least 10 years. The question now is how much Murdoch will pay. Its initial 700p a share always looked too low, and traders believe 850p to 900p would be a more persuasive amount.
Tullow Oil is up 45p at £14.56 after an appraisal well encountered oil at its Enyenra site offshore in Ghana, confirming the field as a major light oil discovery. Analysts at the company broker Bank of America/Merrill Lynch said:
We believe that this successful appraisal confirms Enyenra/Tweneboa as a world-class field and pushes it closer to commercial stage. Reflecting the de-risking of the Enyenra field, we raise our net asset value estimate driven price objective by 60p to £18.80 and reiterate our buy rating on the stock.
