Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Mixed case for changing sectors

FINANCE City Site

AMEC'S switch from the FTSE's construction and building materials sector to support services is a culmination of the group's long-running shift away from low-margin, highrisk construction towards more reliable, higher-value services.

Of course, it has hardly been alone here and it is difficult to find a quoted construction group today which will admit to bidding for work in open competition.

Amec's switch was apparently prompted by the FTSE global classification committee, which was conscious that two thirds of the group's business now comes from 'services'.

Arguably, huge continuing workloads in long-term framework contracts and PFI projects mean other contractors could style much of their business as 'services' operations and qualify to switch.Yet it is not clear that doing so brings great advantages.

The new listing might help Amec's investor relations effort, particularly with overseas shareholders. And, in a bid situation, a support services classification might prove a more compelling context for investors to stick with the existing management.The group's decision to change its reporting segments, not for the first time, may also help its profile with investors, particularly its emphasis on the promising oil and gas business. But the days of construction-related companies in the support services sector enjoying a premium share price rating over those they have left behind are long gone.Thanks to the mishaps at Jarvis, Amey and others, the City may even be wary of companies making the switch.

Amec's departure from construction and building materials also comes as it is being somewhat out-shone by other leading lights in the old sector, notably Balfour Beatty and Carillion. Both of theses firms increased their interim dividends by 10 per cent against Amec's 5.6 per cent.

With Balfour's shares up 38 per cent this year and Carillion's up 61 per cent, both are now on higher stock market ratings than Amec.Keeping up with these two will remain the challenge.