LONDON (Alliance News) - Amec Foster Wheeler PLC shares rose on Tuesday after underlying performance for the first half of the year beat expectations, but the company ultimately entered the red due to some substantial impairments and write-downs.
Amec Foster Wheeler shares were trading up 14% to 532.00 pence per share on Tuesday morning, the best performer in the FTSE 250.
Jon Lewis took over as the chief executive of the energy services company at the start of June and published his first set of results, which showed a surprising rise in revenue in the first six months of the year, but the company is still being hit by weak commodity prices.
Revenue was 6.7% higher year-on-year at GBP2.84 billion from GBP2.66 billion the year before thanks to record levels of revenue from solar projects and the UK North Sea, which was partly offset by a weak performance in the oil and gas unit in the Americas.
Earnings before interest, tax, depreciation and amortisation and exceptional items amounted to GBP177.0 million in the half, down from GBP188.0 million and adjusted earnings per share dropped to 28.2 pence from 34.0 pence.
Although earnings dropped on an underlying basis, they were considerably better than analyst estimates. Consensus figures showed the expectation was for first half revenue to be GBP2.53 billion and adjusted Ebitda of GBP168.0 million, both 11% below the actual results.
However, Amec Foster Wheeler booked a non-cash impairment charge totalling GBP440.0 million. This comprised of a GBP246.0 million impairment of the goodwill and intangible assets of the up-for-sale Global Power Group unit, a GBP125.0 million impairment against intangible assets in the Americas, a GBP35.0 million impairment against two operations that have been put up for sale, and a GBP34.0 million impairment against ERP Systems.
Further exceptional items totalling GBP53.0 million also were booked in the first half.
That plunged Amec Foster Wheeler into the red at the pretax level, as it reported a pretax loss of GBP446.0 million compared to a GBP73.0 million profit the year before. Before exceptional items, pretax profit amounted to GBP137.0 million in the first half of 2016, compared to GBP165.0 million the year before.
The interim dividend, as expected, was severely cut from the previous year, dropping to 7.4 pence in the first half of 2016 from the 14.8p paid the year before.
Net debt at the end of June was in line with expectations and stood at GBP1.08 billion, up 13% from GBP957.0 million at the end of June 2015. Amec Foster Wheeler is still hoping to have net debt down to GBP1.10 billion by the end of the year, excluding asset disposals, which are also expected to generate GBP500.0 million of proceeds by June 2017.
That net debt target has been changed from the original goal to have net debt of GBP1.00 billion by the end of the year.
Global Power Group is one of the assets set to be sold and that will be offloaded, Amec thinks, within the next 12 months.
The order book at the end of June stood at GBP6.20 billion, dropping 9.0% from GBP6.60 billion a year earlier.
"I have initiated a wide-ranging review of the strategy, our organisation structure and cost base - which we are now part-way through. I expect to update investors on these issues in the autumn," said Chief Executive Jonathan Lewis.
Amec reiterated that is still expects 2016 to be a year of difficult market conditions across the US upstream oil and gas and mining markets, but believes that will be partly mitigated through its exposure to a number of other end-markets, including downstream oil and gas, renewables, and government work, meaning like-for-like revenue should be slightly lower over the full year.
"Our industry continues to face very challenging conditions, with capital projects across natural resources markets being delayed and cancelled in many parts of the world," said Lewis. "Despite this, we continue to benefit from the diversity of our platform and we remain on track to deliver the operational guidance we gave at the beginning of the year."
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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