16th Jun 2006 07:00
AMEC PLC16 June 2006 AMEC plc Update on AMEC SPIE disposal, exceptional items and current trading Key points: • Exceptional gain on sale of AMEC SPIE approximately £295 million after tax. • Exceptional charges for costs and contract provisions related to AMEC's previously announced exit from certain construction activities, approximately £35 million after tax. • Provisions for future legal costs mainly in respect of AMEC's exit from certain construction activities and other costs related to protracted disputes, approximately £30 million after tax. • Continued strength in Oil and Gas, recovery in North American Industrial and performance in Mining and Iraq better than expected. Strong performance expected in the Investments business in 2006. Trading remains weak in UK Construction. • The Board maintains its expectations of the pre-exceptional outcome for the year as a whole, despite a weaker first half than previously anticipated and assuming recovery of preferred bidder costs of £7 million on the Colchester General Hospital scheme, cancelled this week. Sir Peter Mason, Chief Executive, said: "We are delighted with the result of the sale of AMEC SPIE, which generates an exceptional gain of £295 million after tax. After the charges being announced today, the sale and the aggregate exceptional gain of £230 million after tax in 2006 gives AMEC flexibility for future investment whilst also allowing consideration of a return of capital to shareholders. We believe that the charges we are taking allow us to draw a line under previously announced business closures." £295 million after tax exceptional gain on sale of AMEC SPIE------------------------------------------------------------The exceptional gain arising on the sale of AMEC SPIE is expected to beapproximately £295 million after tax. The book value of AMEC SPIE as at 30 June2006 will be approximately £325 million. Proceeds from the disposal will be used initially to pay down debt and willleave the group in a net cash position immediately following completion. Theaverage net debt for the year ending 31 December 2006, previously expected to be£400 million, will fall to around £200 million. A Circular containing details of the disposal and notice of an ExtraordinaryGeneral Meeting will be sent to Shareholders shortly, with the meeting expectedto be held in early July 2006. The sale of AMEC SPIE is expected to complete in late July 2006 and theexceptional gain will be reported in the second half of 2006. Exceptional charges-------------------Closure and exit costs - approximately £35 million after tax------------------------------------------------------------In November 2005, AMEC announced that total costs of exiting road building on alump-sum basis in the UK and US together with certain building/refurbishmentactivities in the UK would be approximately £30 million after tax. Finalisationof remaining contracts has been more difficult than expected and a further posttax provision of approximately £20 million is now being made. Most of theprojects in these areas of activity have now been completed. Good progress has been made in respect of AMEC's exit from lump-sum Oil and Gasfabrication and settlement of final accounts on other Oil and Gas projects.However, no progress has been made on one major project to-date in 2006 andalthough negotiations continue, a provision of £15 million after tax has beenmade. Future legal and other costs of disputes - approximately £30 million after tax------------------------------------------------------------------------------As previously announced, the group is exiting from certain constructionactivities in both the UK and US and is involved in contract disputes, whichhave in some cases become increasingly prolonged and costly. As a result a posttax provision of approximately £20 million has been made to cover increasingcosts of litigation, particularly in the US. The group is also involved in disputes in respect of two construction projectscompleted some years ago where it had been believed that insurance policieswould respond in the event of claims being proven against AMEC. There is nowsome concern that the insurance policies may not respond in full and, therefore,an after tax provision of about £10 million has now been made. The Board believes that these first half charges represent a cautiousassessment. Around £40 million of the charges will be cash items, expended in2006 or later. Current trading---------------The AMEC SPIE businesses being sold performed in line with expectations duringthe first half of 2006 and will be reported by AMEC as a discontinued activityfrom 1 January 2006. As previously announced at the time of the Annual General Meeting, year-to-dateperformance in Oil and Gas has been strong, recovery continues in North AmericanIndustrial activities and trading has been better than expected in Minerals andMetals Mining and in Iraq. Strong performance is expected in the Investmentsbusiness in 2006. Trading remains poor in UK Construction, resulting in a firsthalf weaker than previously anticipated. On 14 June 2006, Essex Rivers NHS Trust announced the cancellation of theColchester General Hospital PFI scheme where AMEC, in joint venture, waspreferred bidder. The project had been expected to reach financial close during2006. The issue of reimbursement of costs of £7 million, which have beencapitalised in the two years since being appointed preferred bidder, has beenraised with both the Trust and the NHS centrally. The Board maintains its expectations of the pre-exceptional outcome for the yearas a whole, despite a first half weaker than previously anticipated and assumingrecovery of preferred bidder costs of £7 million on the cancelled ColchesterGeneral Hospital PFI scheme. Enquiries to:-------------AMEC plc +44 (0)20 7634 0000 Analysts and investors:Sir Peter Mason KBE, Chief ExecutiveStuart Siddall, Finance DirectorNeil Jamieson, Director of Investor Relations Media:Juliet Sychrava, Director of Corporate CommunicationsCharles Reynolds, Head of Media Relations Citigroup Global Markets Limited +44 (0)20 7986 6000Sam SmallDimitrios Georgiou UBS Limited +44 (0)20 7567 8000Tom CooperJonathan Bewes Notes to editors----------------AMEC plc is an international project management and services company thatdesigns, delivers and supports infrastructure assets for customers worldwideacross the public and private sectors. In 2005, AMEC employed 45,000 people inmore than 40 countries, generating annual revenues of around £5 billion. The AMEC SPIE businesses being sold comprise the Continental EuropeanMultitechnical Services business, the French rail business and 50% of railactivities in the UK, together with AMEC SPIE's Oil and Gas activities,excluding pipelines. Together, these businesses generated profit beforeinterest, intangible amortisation and income tax of £49.7 million and revenuesof £1,755 million in 2005. If the sale of AMEC SPIE had taken place at the end of July 2005, proforma IFRSpre-tax profit* for the year ended 31 December 2005 would have been about £106million, including £23 million in respect of discontinued businesses, ascompared with the £120.9 million reported. * before exceptional items and intangible amortisation Colchester General Hospital PFI scheme--------------------------------------An AMEC joint venture was appointed preferred bidder for the Colchester GeneralHospital PFI scheme by the Essex Rivers NHS Trust in December 2004. The schemehad a capital value of approximately £170 million and had been expected to reachfinancial close during 2006. This scheme, in common with other PFI hospitals in procurement, has been calledin by the NHS for review. During the review, the NHS changed the way in whichTrusts are funded ("Payment by Results"). As a result of the review and otherfactors, the Essex Rivers NHS Trust believes that its revenues will be reducedand has decided that the scheme will not proceed. AMEC has incurred costs which have been capitalised in the two years since beingappointed preferred bidder. The issue of reimbursement of these costs has beenraised with both the Trust and the NHS centrally. AMEC's shares are traded on the London Stock Exchange where the company islisted in the Support Services sector (LSE: AMEC.L). Citigroup Global Markets Limited and UBS Limited are acting as FinancialAdvisers to AMEC in relation to the sale of AMEC SPIE. Citigroup Global Markets Limited and UBS Limited are acting exclusively for AMECand are not acting for any other person in relation to the sale of AMEC SPIE andwill not be responsible to any person other than AMEC for providing theprotections afforded to clients of Citigroup Global Markets Limited and UBSLimited or for providing advice in relation to the contents of this document orthe sale of AMEC SPIE. Internet users will be able to view this announcement, together with otherinformation about AMEC plc, at the company's web site www.amec.com. ENDS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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