Amec Foster warns tough conditions will hit scope revenue, trading margin

Consultancy and engineering group Amec Foster has admitted it continues to expect the growth seen in the downstream and Middle Eastern oil & gas markets to be offset by tougher conditions elsewhere.

The group, which designs and constructs processing facilities for the upstream oil and gas industry, said that continued customer pricing pressure, particularly in the oil & gas market, is expected to generate a further modest reduction in the 2015 trading margin, compared to previous guidance.

It said a number of project delays, a drop in scope revenue and continued customer pricing pressure would see its trading profit to be more weighted to the second half this year than in 2014.

In the four months ended April it generated scope revenue of £1,606m, 0.9% lower than last year's pro forma result, and 3.6% lower on a like for like basis. For 2015, Clean Energy E&C scope revenue is expected to be less than 10%, while Global Power Group (GPG) scope revenue is expected to be a similar level compared to last year following delays to design and supply contracts in the year-to-date.

"Overall, we now expect pro forma like for like Scope Revenue to be modestly lower in 2015," Amec said. "On current market forecasts, the reversal of the currency headwinds we experienced in 2014 will add approximately £150m to scope revenue."

Customers have continued to delay project sanctions for discretionary capital spend, particularly in upstream, but growth in downstream has continued, particularly in the US and the Middle East.

The clean energy division also saw some project delays in the North American renewables market, but the situation was more upbeat in Europe, where recent contract wins in the nuclear and transmission and distribution markets contributed to the growth in the long-term order book.

Chief Executive Samir Brikho said: "The integration of Foster Wheeler is progressing according to plan, and we are encouraged by the initial customer reactions to our new service offering, including the first revenue synergy wins.

"In the first four months of the year we have experienced some challenging conditions. We have seen the benefits of our low-risk, multi-market model support our top line performance, and deliver growth in the order book to a new record."

The order book stood at £6.7bn at the end of April, compared to £6.3bn at the year end, reflecting an increase of 6.3% from December.

The group's cost saving programme remained on track to deliver approximately £40m of benefits, and an exceptional charge of £50m, in 2015. It continues to expect that by 2017 it will see annual benefits of around £85m.

Scope revenue excludes the incremental procurement of AMEC and pass-through procurement of Foster Wheeler.