After much speculation, Amec last week hung up its boots in the construction sector and started this week as a quoted support services company.
Contractors who remain listed under construction and building materials will be watching closely.
If Amec’s share price begins to outperform that of its traditional contractor rivals, they are likely to want to follow suit. There would be a good case to be made by the likes of Carillion, Balfour Beatty, Alfred McAlpine and Mowlem. All have a large degree of repeat work yielding higher margins, though some derive a greater proportion of earnings from services than others.
Some of the work that is defined by contractors as construction would perhaps better be classed as support services, particularly long-term framework agreements in which companies do not have to re-tender for individual jobs.
Amec’s share price fell by less than 1% to 319.5p in its last week as a quoted construction company, but City and beady rivals will be more focused on its performance over the coming weeks and months.
The state of the housing sector is somewhat clearer – and the situation is shaky to say the least. All recent industry reports and statistics continued to agree that the market is in for a rocky ride. Housing research group Hometrack published its latest monthly survey on Friday – exquisitely entitled House prices falling like autumn leaves – which reinforces the point that house prices have dropped for the fifth consecutive month.
The picture was not helped by estate agent Countrywide, which issued its second negative trading statement in as many months on Friday. It warned that “market conditions” would lead to losses in the fourth quarter, and that pre-tax profit for 2004 would be “significantly below current forecasts”.
Housebuilders overall remained unscathed by the news, with a rise in the share price of most. Given that the blows dealt by Countrywide and Hometrack were only dealt on Friday, this is not surprising, and the force will likely be felt by the end of trading today.
Both the construction sector overall and the All-Share remained little changed last week at 2973 and 2370 respectively.
Angela Monaghan is business editor