2nd Jun 2015 09:48
LONDON (Alliance News) - Amec Foster Wheeler PLC Tuesday warned its scope revenue will be "modestly" lower in 2015 than in 2014 and that its trading margin will suffer a "further modest reduction" compared to its previous guidance, as challenging conditions in the upstream oil and gas industry continues.
The FTSE 250-listed oil services company also said it expects trading profit to be more second half weighted than in 2014.
Amec Foster said the oil and gas market trends seen in recent months have continued with customers continuing to delay project sanctions for discretionary capital spend, particularly in upstream. Growth in downstream continues, notably in the US and the Middle East.
The company is expecting current revenue trends to continue in 2015, with growth in downstream and in Middle Eastern oil and gas markets, offset by other conditions "elsewhere", it said.
"Overall, we now expect pro-forma like-for-like scope revenue to be modestly lower in 2015. On current market forecasts, the reversal of the currency headwinds we experienced in 2014 will add approximately GBP150 million to scope revenue," said Amec Foster Wheeler.
"Continued customer pricing pressure, particularly in the oil and gas market, is expected to generate a further modest reduction in the 2015 trading margin, compared to previous guidance," it added.
Trading profit is set to be more second half weighted than in 2014 due to the timing of expected contract close outs and because of a USD32.5 million gain from a contract settlement for the Global Power Group division in the first half of 2014 that will not be repeated.
Amec Foster said there had also been delays to design and supply contracts within the Global Power Group division, which has impacted the division's performance to date.
Amec Foster Wheeler said scope revenue was GBP1.60 billion in the four month period to end-April, falling from GBP1.62 billion a year earlier. Amec Foster said revenue was down 0.9% on a pro-forma basis and down 3.6% on a like-for-like basis, following the GBP1.9 billion merger of Amec and Foster Wheeler which was agreed in January 2014 and completed in November.
Scope revenue excludes the incremental procurement of AMEC and pass-through procurement of Foster Wheeler.
Foster Wheeler was formed in 1927 from merger of two companies based in the US - the Power Speciality Co and the Wheeler Condenser and Engineering Co - and was acquired by in November by AMEC PLC, which was formed in 1982 from the amalgamation of Leonard Fairclough and Son and the William Press Group.
"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," said Chief Executive Samir Birkho.
At the end of April, the company had an order book of GBP6.70 billion compared to GBP6.30 billion at the end of 2014, representing a 6.3% rise.
In clean energy, the company has seen some project delays in the North American renewables market, whilst in Europe, recent contract wins in the nuclear and transmission and distribution markets have contributed to the growth in the long-term order book.
The company said its cost savings plan remains on track, aiming to deliver GBP40 million of savings, and "an exceptional charge" of GBP50 million in 2015, leading to annual benefits of around GBP85 million.
"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," said Birkho.
In a separate statement on Tuesday, Amec Foster said it has won four contracts from SP Energy Networks to construct three new overhead power lines and refurbish a further overhead line, all in South West Scotland.
The value of the contracts, which are scheduled to be completed by the end of 2016, has not been disclosed.
The work is being carried out for SP Energy Networks, and will provide power on behalf of supply companies through a network of power lines that they own and maintain. The new lines support the UK government?s renewable energy objectives by enabling renewable energy to be distributed from Scotland to England and Wales, it said.
For the three new-build projects, Amec Foster Wheeler is responsible for the design, supply and construction of three 132 kilovolt overhead lines extending over 52 kilometres through Ayrshire. The fourth contract involves the modernisation of an existing overhead line between Kilmarnock and Coylton, also in Ayrshire.
Amec Foster Wheeler shares were down 2.1% to 901.38 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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