AMEC Plc (AMEC)

Slick operator

Once a distracted support services company, CEO Samir Brikho has reshaped AMEC (LSE, AMEC) into a well oiled, focussed international project management and services provider of much repute.

Management have recently advised that all core divisions are hitting their targets, and that there is more to look forward to. Three acquisitions since March, costing £70 million, have expanded the group's expertise and geographical reach.

Robust energy and metals markets have underpinned the natural resources division's order book. At the end of March this stood at £1.32 billion, some 9 percent higher than a year ago.

The division continues to enjoy the bull market ride in commodities, and is making the most of the tremendous opportunities that exist. One such is the oil sands market.

Indeed in May, the company acquired Bower Damberger Rolseth Engineering for £22 million. Bower provides technical services to customers involved in the rapidly growing Canadian oil sands market. 

The Bower deal follows April's acquisition of project services company Rider Hunt for £25 million. Rider also provides services to the oil, gas, chemical, energy and process industries across a broad area, further widening AMEC's reach.

And this ever increasing global reach is putting AMEC at the top of the frame for many significant deals.

In June, oil major BP selected AMEC as one of three companies to provide engineering and project management services for offshore developments around the world.  Whilst in May, Baffinland Iron Mines awarded AMEC a C$150 million engineering, procurement and construction management contract through to 2014 for the US$4.1 billion Mary River Iron Ore project in Canada.

Meanwhile, AMEC's second largest segment, Power and Process, designs, delivers, enhances and maintains infrastructure for clients in power process and nuclear markets.

Within the last fortnight, AMEC has emerged as a leading contender to manage the £40 billion United Arab Emirates nuclear programme.

Putting this prospective mega deal aside, the power and process order book is already healthy, standing at £1.29 billion at 31 March 2008. Such is the demand that management are able to be more selective so as to maintain margins.

And with earnings ticking up, it is also understandable that CEO Samir Brikho has given the green light for the unit to embark on selective acquisitions.

The smallest division of AMEC, Earth and Environmental, has also experienced good growth. The division provides specialist environmental, geotechnical, programme management and consultancy services.

And we expect acquisitions such as two recent additions in the US, to lift performance here further. After acquiring Smith Williams Consultants in April, this month AMEC purchased Geomatrix Consultants for £43 million.

So across the group order books are healthy and acquisitions are bolstering capacity.  Furthermore, the group's 2-3 year Operational Excellence plan, aimed at improving portfolio quality, customer service and internal controls is set to be a key contributor to the achievement of group EBITDA margins of 8 percent by 2010.