Amec made a solid profit last year, but undervalued shares could make British contractors takeover targets for foreign firms, says Peter Mason.
The low value of British contractors' shares means that they are at risk of being bought cheaply by overseas firms, says the boss of the UK's largest contractor.

Speaking at Amec's annual results announcement, chief executive Peter Mason said: "I don't see that, in a UK context, the low value of construction shares will lead to mergers and acquisitions, but the situation does make UK companies vulnerable to firms outside the UK."

Mason added that undervaluing share prices had a demoralising affect on staff. Amec's shares have fallen by more than 25% since the £221m purchase of Canadian project manager Agra last month. He said: "It is quite depressing since the outlook has never been better. It is not for us to set the market rate, but it is disappointing for staff as share price is seen as proxy for performance." Mason's comments were the downside of what was otherwise a solid set of results.

Amec enjoyed a 15% increase in pre-exceptional, pre-tax profit last year to £82.2m. Turnover was £3.1bn, down 8.6%, but Amec has started 2000 with a record order book of £3.3bn.

The firm reported that 75% of the work carried out by its capital projects division was negotiated rather than won by competitive tender. This helped it increase margins from 0.9% last year to 1.4%, with a 51% rise in operating profit to £31.1m. Turnover in capital projects was £2.2bn. The capital projects division, which made more than 2500 redundancies last year, was, however, let down by a poor performance at US business Morse Diesel.

The more lucrative services sector showed profit growth of 5% and margins of 4.7%, compared with 4.5% in 1998. The services sector contributed £40.3m to group operating profit from a turnover of £850m, down slightly on £859m in 1998.

The property development and investments division reported a jump in operating profit of £10.3m, up from £2.2m in 1998. This was largely because of the timing of sales within the property development business.

Mason said again that he wanted to storm North America with the merged Canadian project manager Agra. Amec also intends to expand work in the oil and gas sectors in the Atlantic and Pacific oceans and the Caspian sea.

The acquisition of Agra has catapulted Amec into the top three engineering design and construction groups in the world, behind US firms Bechtel and Fluor Daniel.