ENGINEERING giant Amec, which has a big presence in the North Sea oil services market, has suffered a four per cent fall in profits that it said partly reflected lower income from new developments in the area although spending on existing assets increased.
The recent strength of the pound has also posed challenges for the company, which has 3,500 employees working in and offshore the Aberdeen area.
London-based Amec recorded earnings before interest, tax and amortisation of £152 million for the six months to June, down from £159m in same period last year.
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Revenue fell by seven per cent to £1.85 billion from £2bn, following a £160m adverse impact from translating foreign currency earnings into Sterling.
Firms which report in Sterling but win lots of business overseas will face problems maintaining their reported profits following the rise in the value of the pound.
Revenue in AMEC's biggest division, serving the Americas, fell eight per cent annually to £1.06bn.
AMEC reported a seven per cent fall in revenue in its Europe division, which earns most of its income in the UK North Sea and nuclear markets.
The company said the fall in European revenue, to £545m from £589m, reflected lower greenfield activity in the UK North Sea, "as expected".
Research by Oil & Gas has suggested that spending on new UK assets may fall in 2014 from the record levels reached last year. The industry body has said spending on new UK North Sea assets reached a record £14.4bn in 2013 with a further £13bn expected in 2014.
Amec said it had done well in the market to support existing assets in the UK North Sea, where oil and gas firms are trying to boost production from brownfield assets.
The results will be studied with interest by Aberdeen-based Wood Group, which has been mooted in the past as a possible takeover target for Amec but has made bold acquisition moves itself.
Neill Morton, an analyst at Investec, described Amec's first half results as lacklustre. He noted: "Given the recent sharp slide in its share price, Amec's pro forma valuation is starting to look more interesting."
Amec has a stock market capitalisation of around £3.2bn compared with £2.8bn for Wood Group.
In June Wood said it was busy on new subsea projects in Europe while its North Sea maintenance arm was doing well.
Amec's order book increased to £4.2bn at the period end from £3.9bn last time.
Chief executive Samir Brikho said: "A 10 per cent increase in the interim dividend (to 14.8p per share from 13.5p last time) signals our belief in the underlying strength of Amec."
Amec expects to complete the acquisition of US rival Foster Wheeler, for £2bn, in the fourth quarter.
In May Amec said it was reviewing the pay rates of contracting personnel working from Aberdeen to ensure its future competitiveness and that of the UK oil and gas industry. Wood Group said it would cut the pay rates of 1,600 contractors in the UK by 10 per cent.