More buying for customers cuts AMEC’s profit margin

10 August 2012

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10 August 2012 | Adam Leach

Profit margin at UK engineering firm AMEC has fallen because the company had to increase the amount of buying it carried out for its customers, the company has reported.

In half-year results published yesterday the company announced its margin was down to 7.5 per cent as a result of “increased procurement” for its customers, particularly with regard to natural resources. Excluding the increased buying activity the margin would be 8.2 per cent.

During the six-month period, procurement activity increased significantly and the company doesn’t make a profit on what it buys for customers.

In an interview to accompany the results, Iain McHoul, CFO at AMEC, said: “We've been asked by certain customers to undertake additional procurement activity in natural resources, in conjunction with high-quality engineering services, which is what we're really about. Now the scale of that procurement is very much increased this half, an increase of about £200 million. The margin we earn from that is next to nothing.”

But while margins were squeezed, company revenue for the same period increased significantly. It reported growth of 37 per cent to £2.026 billion. As a result, pre-tax profits were up 25 per cent to £152 million.

Samir Brikho, AMEC chief executive, said: “The order book has been maintained at record levels. We see continued demand for our services, and this has not been significantly impacted by the on-going economic uncertainty.”


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