Corporate finance--AMEC ppt

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Corporate finance--AMEC ppt

  1. 1. Coursework Presentation Group-Work Dhiraj Malik Robert Kanfrah Shekhar Ghanvat
  2. 2.  Company brief Highlights Agency Problems Key risks faced by the company Conclusion
  3. 3.  AMEC plc is one of the world’s leading engineering, project management and consultancy companies. AMEC plc is listed on London stock exchange.
  4. 4. Srno Sources of Agency problems Trend Comments % Change in dividends to Less chances of 1 shareholders vs. % Change in SHD- 19%, DR-4% agency problems directors remuneration Higher chances of 2 Cash availability Avg. 693 Millions GBP agency problems Less chances of 3 Board Setup Non-Exe/Exe= 62.6 % agency problems Sales growth of 9% for Less chances of 4 Company Growth past 5 years agency problems
  5. 5.  Directors Remuneration & Dividends to Shareholders
  6. 6. Srno Risk Indicators/Factors AMEC Trend Comments Companys trend towards decreasing 1 Operating Leverage Decreasing trend proportion of fixed costs in overall costs,hence less increase in EBIT in proportion to sales Proabililty of high agency problems 2 Financial leverage No debt No benefits on leverage effect Decreasing trend from 2008 Higher beta values in 2011, than competitors, 3 Market Risk till 2010, 2011 saw rise higher risk ,higher risk premiums for investors
  7. 7.  Degree of Operating Leverage
  8. 8.  Degree of Financial Leverage
  9. 9. Degree of Financial Leverage 2007 2008 2009 2010 2011 WOODGROUP 0.996 1.096 1.083 0.090 91.013 PETROFAC 1.546 1.163 2.808 2.675 0.102 AMEC 0 0 0 0 0
  10. 10. Return on Equity (ROE) 2007 2008 2009 2010 2011 AMEC 11% 17% 13% 20% 15% PETROFAC 41% 47% 38% 72% 47% WOODGROUP 17% 22% 12% 12% 10%
  11. 11. Risk Indicators/Factors Comments In to Acqusitions- Diversifying1 Geopolitical and Economic risks in to Geographical areas, across energy sectors2 Project costs Cost Plus contracts3 Inflation Hedging4 Exchange rates Hedging
  12. 12. • AMEC uses no debt- Hence no financial risk, however signals that Company not confident of future cash flows.• High Cash & Cash Equivalents ( £ 696 Million) - Agency Problem• Acquisitions- For Growth but is the value of company increasing. (£ 3628 Million)• EBIT drop in 2011 ( - 1.3%) in spite of increase in sales revenue ( + 10.5%)- Challenge for Rappaport model• Return on Equity (15.5 %) less than cost of equity (16.7%) still investors interested• Dividend policy of company changes in 2012 with buy back of £ 400 million public shares thus reducing equity. – Target of 100 pence EPS by 2015. Currently ( EPS 70.5)

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