Coursework Presentation Group-Work Dhiraj Malik Robert Kanfrah Shekhar Ghanvat
Company brief Highlights Agency Problems Key risks faced by the company Conclusion
AMEC plc is one of the world’s leading engineering, project management and consultancy companies. AMEC plc is listed on London stock exchange.
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
Directors Remuneration & Dividends to Shareholders
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
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
• 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)