10th Mar 2005 07:01
AMEC PLC10 March 2005 10 March 2005 AMEC plc Preliminary Results 2004 Highlights: • Record pre-tax profit* of £118.1m up 5% • Operating profit in Engineering and Technical Services up 8% • Oil and Gas boosts margin to 4.7% and expands in Houston • PPP portfolio valued at £77m • Dividends increased by 5% to 11.0p per share • Further progress expected across all 3 main businesses Commenting today, Chief Executive, Sir Peter Mason KBE, said: "Our three main business segments made real progress this year. Operating profitfrom our services business was up 8% while our oil and gas business wonimportant new contracts worldwide, improved its margins and acquired astrategically important business in Houston. "What has also come through this year is the strength of our maturing PPPbusiness. We now value our portfolio, excluding recent wins, at £77m, based onprevailing market valuations, considerably more than the book value of £42m. "Oil and gas, which now accounts for one third of our profit, will be animportant area for growth, whilst we expect volume and margins in our servicesbusiness to continue to increase. In PPP, we recently became preferred bidder onthree important schemes and will continue to invest both in the UK and overseas. "These results really confirm the ability of our company to deliver. Havinginvested cautiously, cut costs and taken a lot of risk out of the business, wecan look forward to reaping the benefits." * Before goodwill amortisation and exceptional items Financial highlights* 2004 2003 £ million £ million Total turnover 4,816.4 4,712.7 +2.2% Total operating profit 149.6 141.7 +5.6% Pre-tax profit 118.1 112.5 +5.0% Pre-tax profit after goodwill 65.7 95.7 -31.3%amortisation and exceptionalitems Effective tax rate 32.8% 32.0% +0.8pts Average weekly net debt 450.0 360.0** +25.0% Diluted earnings per ordinary 25.9p 25.3p +2.4%share Dividends per ordinary share 11.0p 10.5p +4.8% * Unless otherwise stated, amounts and percentage movements throughout thisdocument relating to the profit and loss account are stated before goodwillamortisation and exceptional items. Amounts and percentage movements relating tototal operating profit and margin of Engineering and Technical Services, Oil andGas and Project Solutions activities are stated before corporate costs of£24.3m, goodwill amortisation of £21.6m, a pre-tax exceptional charge of £17.8mplus goodwill previously written off to reserves of £13.0m. ** Pro forma average weekly net debt for the year ended 31 December 2003 assumesSPIE S.A. was acquired and 51% of Spie Batignolles was disposed of on 1 January2003. Any forward looking statements made in this document represent management's bestjudgement as to what may occur in the future. However, the group's actualresults for the current and future fiscal periods and corporate developmentswill depend on a number of economic, competitive and other factors includingsome which will be outside the control of the group. Such factors could causethe group's actual results for future periods to differ materially from thoseexpressed in any forward looking statements made in this document. The preliminary results slide presentation and speaking remarks will beavailable on AMEC's web site www.amec.com on 10 March 2005. 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 CorporateCommunicationsCharles Reynolds, Head of Media Relations OVERVIEWAMEC made solid progress in 2004 and was reclassified to the Support ServicesSector of the London Stock Exchange by the FTSE Global Classification Committee.This change of stock market sector, which recognises the shift in the balance ofAMEC's activities towards services, was followed on 2 December 2004 by theannouncement of a revised statutory segmental analysis, which better reflectsthe ongoing business portfolio. The segments are Engineering and TechnicalServices ("ETS"), Oil and Gas and Project Solutions. The largest of AMEC's three business segments, ETS, delivered another robustperformance in 2004, with total operating profit up 7.9%. Activity levels in Oiland Gas remained high and the quality of earnings was improved, with operatingmargin increasing to 4.7% (2003: 4.3%). A wide range of substantial newcontracts was secured from clients around the world during 2004 and thecompetitive position of this business was strengthened in January 2005 throughthe acquisition of Houston-based Paragon Engineering Services Inc. ("Paragon").Performance in the Project Solutions business was steady, following AMEC's exitin the first half of 2004 from US Construction Management and the disposal ofAMEC's remaining 49% interest in the regional French construction business SpieBatignolles. Pre-tax profit for the year increased by 5.0% to a record £118.1m and was slightly ahead of the consensus of market expectations*. The effective tax rate for the year increased to 32.8% (2003: 32.0%), which, together with an increase in potentially dilutive shares from share option awards, constrained the growth in diluted earnings per share to 25.9p (2003: 25.3p). Proposed dividends for the year are increased by 4.8% to 11.0p (2003: 10.5p). On 20 January 2005, AMEC issued 30,164,397 new ordinary shares at 300 pence per share by way of a placing to support its increased acquisition and equity investments programme, raising net proceeds of £88m. * Source: Hemscott Group, 7 March 2005 OUTLOOKThe board remains confident that each of AMEC's three business segments will deliver further growth in 2005 in line with its earlier expectations, even after the transfer of UK rail maintenance contracts to Network Rail and the disposal of Spie Batignolles, which together represented about £10m of operating profit in 2004. BUSINESS REVIEW Engineering and Technical Services ("ETS")With turnover of £2.3bn, representing 47% of group total turnover in 2004, ETSis the largest of AMEC's three segments. ETS comprises three businesses,Multitechnical Services, Environmental Services andDesign and Engineering Services. Services in the first two businesses aredelivered through extensive local networks, with over 300 locations inContinental Europe and around 100 in North America. Unlike the rest of AMEC, where the company meets customers' needs as a nationalor international business, the Multitechnical and Environmental businessesprovide services locally to a diverse regional and international client base.With over 50,000 clients in many different sectors and a high percentage ofrepeat business, ETS is generally a highly predictable business. Multitechnical ServicesThis business provides a broad range of electrical, mechanical andcommunications services to a very large number of customers in ContinentalEurope. 2004 was another year of robust performance, with increased activity reflectingorganic growth, driven broadly by levels of economic activity, together with aseries of eight small acquisitions that extended the local services network andcapability in France, the Netherlands, Portugal and Spain. This business willcontinue to follow the same growth strategy in 2005, targeting further volumegrowth and an improved margin, particularly in Benelux. Environmental ServicesThis business provides clients with a range of specialist services fromenvironmental assessments to geo-technical and materials testing services. Itoperates mainly in North America but is growing in other markets. 2004 was a record year, with increased levels of activity under a frameworkcontract for the US Air Force in locations including Iraq and Guam. The Geomeltcontract for the US Department of Energy at Hanford, initially valued at US$60m,continues to make progress and the first full scale nuclear waste vitrificationis due to be completed by the end of 2005. New offices are being opened in a number of countries and this pattern ofcustomer-driven expansion is expected to continue steadily with increasingdemand for environmental services. Design and Engineering ServicesThis business provides services from front-end design to maintenance support forclients in the UK, the Americas and Iraq across a range of sectors includingtransport, defence, mining, forest products, food and pharmaceutical. In the UK, AMEC is active on framework contracts for clients including BAA andthe Ministry of Defence. There are also specific future opportunities, includingthe restructuring of the nuclear industry which opens to private sectorcompanies from April 2005. AMEC is one of the few companies with the expertiseand relationships to pursue the £2bn of work that the UK government estimateswill be available on an annual basis and is positioning itself to compete inthat market. Investment in US industrial markets remains low. While some sectors, likemining, are now very busy, others, such as food and forest products, have yet toshow any signs of recovery. AMEC has taken further action to reduce the costbase in response. AMEC is working in Iraq under various contracts to restore damagedinfrastructure, including power generation and water. Task orders under thesecontracts have, as expected, taken some time to come through and safety andsecurity remain of paramount importance. Firm awards to date to the AMEC Fluorjoint venture amount to around US$730m, although the final value could be muchhigher. In addition, AMEC has received direct orders totalling around US$130m.These contracts continue to carry no commercial risk as they are all fully costreimbursable. Activity in Iraq made a small contribution in 2004, and whilstconditions remain volatile and it is difficult to predict rates of progress onspecific tasks, this contribution is expected to increase in 2005. AMEC iscommitted to a long-term presence in Iraq and is exploring opportunities in thecountry and in the region. Oil and GasAMEC is a leading international provider of total life of asset services andproject solutions to clients in the oil and gas industry. This businessgenerated turnover of £1.2bn, representing 25% of group total turnover in 2004. During 2004, the services' business increased levels of international activityin regions including the Gulf of Mexico, West Africa, Caspian, Canada and AsiaPacific. The business has extended its portfolio of services into LNG storageand pipeline design and strengthened its position in brownfield projects,operations and asset support services. More work was secured from an increasingrange of customers, including the Kuwait Oil Company, the Korean National OilCompany and Woodside of Australia. The Canadian oil sands business is busy, as more efficient extraction methodsand a strong oil price have made the region's resources more profitable todevelop, whilst the pipelines business was active during 2004 on a range ofprojects including the BTC pipeline in Georgia and the Cheyenne Plains projectin the US.Since the year-end, the acquisition of Paragon, the Houston-based design andengineering company, has significantly improved AMEC's competitive position inthe main decision-making centre for the global oil and gas industry. Paragon allows AMEC to provide a more complete service to customers in the Gulfof Mexico region. It has acknowledged sub-sea pipeline design capability and isworking on projects including the complex Mardi Gras project for BP. Paragonpositions AMEC to become a top tier designer and project manager in Houston, inaddition to strengthening its engineering and asset support relationships withcustomers such as Chevron/Texaco, Marathon and Pemex. The oil and gas industry has seen a change in the model for procurement of largeoil and gas facilities, with clients relocating fabrication activity tolower-cost regions of the world such as Korea. This change has led AMEC toaccelerate its change of focus from construction to higher-value services.During 2004 AMEC completed the vast majority of its upstream lump sum contracts,with the remainder expected to be completed during the first half of 2005. These contracts are being replaced with more stable, long-term services and theOil and Gas order book for 2005 is up year-on-year despite a reduction in theselump-sum contracts. Project SolutionsThis segment, which is generally involved with large infrastructure projects,generated turnover of £1.4bn, representing 28% of group total turnover in 2004.A selective approach is taken to project delivery for public and private sectorclients, with projects often involving design, maintenance or operations supportand sometimes equity participation. Project Solutions includes AMEC's activitiesin PPP, Developments and Wind Energy, which reported an operating profit of£20m, a 10% improvement on 2003. Construction ServicesThis business has strong relationships with clients both in the public andprivate sectors and is active on major projects in defence, transport,healthcare and infrastructure markets. Strength in UK government spending andcontinuing investment in rail infrastructure in Continental Europe and the UKare expected to provide opportunities for growth. PPPIn 2004, good progress was made in delivering the Docklands Light Railwayextension, and the UCLH hospital is heading to completion on time and on budget. Since the year-end AMEC's PPP portfolio has been strengthened through the awardof preferred bidder status for Colchester Hospital, the Docklands Light Railwayextension to Woolwich Arsenal and South Lanarkshire Schools. In total theseprojects have a value to AMEC in excess of £600m. AMEC is also at preferredbidder stage on Incheon Bridge in South Korea, where financial close is expectedshortly. Over the coming years, AMEC expects to achieve increasing earnings from thisportfolio, either from the sale of its investments or from increasing thecontribution from operational concessions. DevelopmentsAMEC has built a leading reputation in urban regeneration, working inpartnership with landowners such as local authorities and private sectororganisations. Over a dozen schemes were under development during 2004,including projects in Reading and Durham. During the year AMEC was awarded amajor scheme to regenerate Lewisham town centre. Planning approval is expectedfor about three million square feet of developments in 2005, a threefoldincrease on the previous year. Wind EnergyAMEC is developing an onshore portfolio of around 1,500 MW, including thirdparties' shares of developments being managed by AMEC. Its offshoredevelopments, which have relatively less attractive investment characteristics,have all been pre-sold, although AMEC continues to be involved in projectmanagement for the owner, with work that carries performance incentives as wellas management fees. During 2004, AMEC submitted planning applications for major schemes at Kyle andthe Isle of Lewis in Scotland, the latter being potentially the world's largestonshore windfarm. The planning process is extremely slow and at the end of 2004a very large percentage of the portfolio remained in planning. Over the next fewyears an increasing number of schemes are expected to emerge from planning,enabling AMEC to commence construction and to release value from its onshoreportfolio. OrdersOrder intake in the ETS business continues to exceed sales, whilst the year-end order book in AMEC's Oil and Gas and Projects Solutions businesses remained solid at £2.4bn (2003: £2.4bn). The quality and volume of the order book in Oil and Gas has improved over thelast 12 months, with large project delivery contracts being replaced by highermargin, lower risk services activities. The year-end order book in Oil and Gasstood at £1.3bn (2003: £1.2bn), whilst Project Solutions recorded £1.1bn (2003:£1.2bn). FINANCIAL REVIEW Financial highlightsTotal turnover for the year ended 31 December 2004 was £4,816.4m (2003:£4,712.7m). Underlying sales growth in 2004 was higher than these figuresindicate. Strong sales growth in ETS was offset by reduced turnover in both Oiland Gas and Project Solutions, as explained below. Pre-tax profit for the year, before goodwill amortisation and exceptional items,increased by 5.0% to £118.1m, with an improvement in the overall margin. Theoverall performance was slightly ahead of the consensus of market expectations*. As previously reported, aggregate exceptional costs of £22.2m (includingassociated taxation but excluding goodwill previously written off) principallyrelated to the exit from US Construction Management, the disposal or closure ofseveral other non-core activities and the disposal of properties. The effective tax rate of 32.8% was broadly similar to prior periods andcontinues to reflect underlying corporation tax rates in Continental Europe. The increase in earnings per share to 25.9p (2003: 25.3p) was constrained by theincreased tax charge and also by the increase in the number of potentiallydilutive shares arising from share option awards. The board is recommending afinal dividend of 7.2p per share (2003: 6.9p) which, together with the interimdividend of 3.8p per share (2003: 3.6p), results in a total dividend of 11.0pper share (2003: 10.5p), an increase of 4.8%. Dividend cover was maintained at2.4 times. * Source: Hemscott Group, 7 March 2005 Segmental reviewTotal operating profit in 2004 was £149.6m (2003: £141.7m). Commentary for eachof AMEC's principal segments of activity is set out below. Engineering and Technical Services------------------------------------ 2004 2003 £ million £ millionTotal turnover 2,293.8 1,952.7Total operating profit 75.3 69.8Margin 3.3% 3.6%Net (liabilities)/assets (8.1) 27.2 Total turnover increased by over 17%, mainly reflecting growth in theMultitechnical and Environmental Services businesses and the consolidation ofSPIE for a full 12 months. Total operating profit increased by 7.9% to £75.3m. The Multitechnical Services business reported another robust performance andthere was a good contribution from some of the UK term contracts and frameworkagreements. The Environmental Services business reported a record year of performance, withproject management activities in Iraq making a useful contribution. Despite encouraging signs earlier in the year, the performance of AMEC's NorthAmerican Design and Engineering operations was mixed. The level of contributionfrom major industrial projects resulted in a decline in the overall margin inthis segment and in response the cost base has been addressed. ETS margin improvement is expected in 2005 as a result of additions to theEuropean branch network over the last 12 to 18 months and by reducing the NorthAmerican cost base. Oil and Gas-------------- 2004 2003 £ million £ millionTotal turnover 1,212.1 1,350.0Total operating profit 57.2 58.2Margin 4.7% 4.3%Net assets 129.2 76.5 The result for 2004 represented a solid overall performance. Total turnoverdecreased by over £100m reflecting changes in the way oil and gas majors areprocuring their fabrication activities, which is increasingly from Far Eastcompanies. AMEC is focusing on higher-value front-end design, procurement and projectmanagement services. This requires less external subcontract work, therebyreducing AMEC's reported turnover but this does have a favourable impact onmargin. A cautious approach to profit recognition continues to be taken on some Oil andGas projects. This is offset to some extent by the improved performance of thegas distribution business, following actions taken in 2003 to bring costs inline with lower levels of activity. The net assets continue to remain at ahigher level than normal. A substantial sum was received prior to the year-endon one project and further receipts are expected in the first half of 2005. Project Solutions------------------- 2004 2003 £ million £ millionTotal turnover 1,368.4 1,487.1Total operating profit 41.4 40.2Margin 3.0% 2.7%Net assets 65.9 10.3 Total turnover was reduced by the strategic decision to exit US ConstructionManagement. In addition, there has been less highways activity in the UK during2004. The result reflects a solid performance from AMEC's Project Equity Investmentactivities. The wind business continues to make good progress on its projects.Whilst the costs incurred in the development phase have an impact on the resultsof this segment, AMEC remains confident of the future returns this initialinvestment will ultimately deliver. The overall margin is in line with expectations for this business with totaloperating profit slightly ahead of last year. PPP future equity commitments, including those projects where AMEC is preferredbidder, are about £60m and the investment of these funds is spread over afive-year period. Having considered the future discounted cash flows arising from AMEC's PPPconcessions, the directors are of the view that the net present value of its PPPportfolio, excluding those contracts where AMEC is preferred bidder, is £77m.The valuation of the portfolio uses an average discount rate (post-tax in theconcession company) of about 10.5%, which is in line with the market rates usedto value PPP investments in the secondary market. This compares with a carryingvalue at the year end of £42m. GOODWILL AMORTISATION AND EXCEPTIONAL ITEMSThe increase in goodwill amortisation reflects a full year charge relating toacquisitions made in 2003. As previously reported, the exceptional charge on a post tax basis increasedfrom the half year. This has arisen as a result of attributable tax on certainproperty disposals in France. AMEC announced in May 2004 the disposal of the Washington and Florida USConstruction Management businesses and the closure of this operation's otheractivities. This represents the most significant component of the exceptionalcharge in the year. Costs have also been incurred in exiting other constructionactivities where the risk/reward profile has been considered unattractive. Therehave also been several disposals of non-core businesses in the second half ofthe year and a net profit has arisen from the rationalisation of the propertyportfolio. Aggregate goodwill of £13.0m on businesses that have been disposed of, which hadpreviously been written off to reserves, has been reported in the profit andloss account as an exceptional charge. This has no effect on the net assets ofthe group. TAXATIONThe effective tax rate on the profit before goodwill amortisation andexceptional items is 32.8%, in line with expectations at the half-year. Thetrend in the rate is upwards as activities, in particular Oil and Gas, areundertaken outside of AMEC's home territories where tax paid is typically at ahigher rate. Net debt and cash flowAverage weekly net debt in 2004 was £450m (2003: £360m). As previously reported,this reflects the temporary increase in capital employed on several Oil and Gascontracts, the planned reduction in AMEC's traditional construction activities,which in the past have provided a good cash profile and the expected funding ofactivities in Iraq, which amounted to £24m as at 31 December 2004. Closing net debt was £283m (2003: £218m) reflecting the factors noted above,whilst the key financial ratios remain good. In July 2004, AMEC completed the refinancing of some medium-term facilities thatwere due to expire in the first half of 2005. The new facility is for afive-year term, retains AMEC's principal covenants and is attractively priced. On 20 January 2005 the company successfully completed a placing of new ordinaryshares, which resulted in net proceeds of £88m. These in part were used toacquire Paragon, a Houston-based oil and gas services company, for £20m in cash. AMEC has recently established a non-recourse debtor securitisation programme inContinental Europe which is expected to be substantially complete by the end ofApril 2005 and to generate about £80m of cash. In 2005, the placing, together with additional proceeds from the securitisationand the expected reduction in capital employed in Oil and Gas contracts, will bepartially offset by currently identified acquisitions and investments and areduction in advance payments. In aggregate, however, these are expected to leadto a reduction in average weekly net debt in 2005 to around £350m. Net interest payableThe group interest charge benefited from a profit arising on the disposal ofanother tranche of PPP subordinated debt investment. The profit is reported onthe same basis as an earlier disposal concluded in late 2001. The group interest charge for the year also reflected the higher level ofaverage net debt and increased interest charges arising from the group'sstrategy to lock into longer-term fixed interest rates, a programme thatstarted, largely, in mid 2003. The increase in the joint venture interest cost will continue in view of thelevel of urban regeneration and PPP activities, as more concessions reach theoperational phase. INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")AMEC is well advanced in implementing IFRS and expects to publish its restatedaccounts in June 2005. AMEC's transition balance sheet (31 December 2003) will benefit from theimplementation of IFRS. Net assets will increase as a result of applying IAS 10,as dividends will no longer be accrued in the balance sheet. This will result inan increase of £20m as at this date. The application of IAS 19 will also resultin an increase in the net assets arising from the pension surplus in AMEC'sprincipal scheme. The net post tax pension adjustment is about £20m. No further adjustments are expected in respect of deferred tax and no change isexpected to the way in which AMEC values its contract work-in-progress and fixedassets (other than ceasing to revalue its property portfolio on an ongoingbasis). Goodwill will be subject to an annual impairment test rather than annualamortisation and whilst intangible assets will have to be amortised, AMECexpects the overall ongoing charge in the income statement to be lower. AMEC does not believe that there will be a material impact on the incomestatement as a result of applying IFRS but there will be increased volatility.Under IFRS 2, AMEC will be required to charge the income statement with thevalue of options granted. The full impact of applying this standard is expectedto result in an annual charge of about £3m. AMEC has decided to adopt IAS 39 with effect from 1 January 2005 and expectsthat this will be the main contributor to any volatility in the incomestatement. The IASB has recently put forward its proposals for accounting forservice concessions and AMEC is assessing the potential impact of theseproposals and in addition how IAS 39 might be applied to those concessions thathave interest or inflation rate derivatives. BOARD CHANGESOn 10 February 2005, Peter J Byrom and Timothy W Faithfull were appointed as non-executive Directors of AMEC plc. Peter Byrom, 60, is Chairman of Domino Printing Sciences plc and Molins PLC. He is also a non-executive director of Rolls-Royce plc and Wilson Bowden plc. Tim Faithfull, 60, is a non-executive director of Canadian Pacific Railway and TransAlta Corporation and is also a director of Shell Pension Trust Limited. CONSOLIDATED PROFIT AND LOSS ACCOUNT 2004 Before goodwill Goodwill amortisation amortisation and and exceptional exceptional items items Total Notes £ million £ million £ million Turnover: Group and share ofjoint ventures 2 4,816.4 - 4,816.4 Share of turnover in joint (158.9) - (158.9)ventures ---------- ----------- ---------- Group turnover 4,657.5 - 4,657.5 Cost of sales (4,051.6) - (4,051.6) ---------- ----------- ---------- Gross profit 605.9 - 605.9 Administrative expenses (479.4) (21.6) (501.0) ---------- ----------- ---------- Group operating profit/(loss) 126.5 (21.6) 104.9 Share of operating profit/(loss)in joint ventures and associates 23.1 - 23.1 ---------- ----------- ---------- Total operating profit/(loss) 2 149.6 (21.6) 128.0 (Loss)/profit on disposal orclosure of operations: ---------- ----------- ---------- (Loss)/profit before goodwill - (21.5) (21.5) Goodwill previously written-offto reserves - (13.0) (13.0) ---------- ----------- ---------- - (34.5) (34.5) Profit/(loss) on disposal of - 3.7 3.7fixed assets ---------- ----------- ---------- Profit/(loss) on ordinaryactivities before interest 149.6 (52.4) 97.2 Net interest payable: ---------- ----------- ----------Group (18.8) - (18.8) Joint ventures and associates (12.7) - (12.7) ---------- ----------- ---------- (31.5) - (31.5) ---------- ----------- ----------Profit/(loss) on ordinaryactivities before taxation 118.1 (52.4) 65.7 Taxation on profit/(loss) onordinary activities 3 (38.7) (4.4) (43.1) ---------- ----------- ---------- Profit/(loss) on ordinaryactivities after taxation 79.4 (56.8) 22.6 ========== =========== Equity minority interests (0.8) ---------- Profit for the year 21.8 Dividends 4 (34.8) ---------- Retained (loss)/profit for the (13.0)year ========== Earnings per ordinary share: 5 Basic 26.7p 7.4p Diluted 25.9p 7.2p Dividends per ordinary share 4 11.0p CONSOLIDATED PROFIT AND LOSS ACCOUNT 2003 Before goodwill Goodwill amortisation amortisation and and exceptional exceptional items items Total Notes £ million £ million £ million Turnover: Group and share ofjoint ventures 2 4,712.7 - 4,712.7 Share of turnover in joint (289.9) - (289.9)ventures ---------- ----------- ---------- Group turnover 4,422.8 - 4,422.8 Cost of sales (3,853.2) - (3,853.2) ---------- ----------- ---------- Gross profit 569.6 - 569.6 Administrative expenses (441.1) (16.3) (457.4) ---------- ----------- ---------- Group operating profit/(loss) 128.5 (16.3) 112.2 Share of operating profit/(loss)in joint ventures and associates 13.2 (0.7) 12.5 ---------- ----------- ---------- Total operating profit/(loss) 2 141.7 (17.0) 124.7 (Loss)/profit on disposal orclosure of operations: ---------- ----------- ---------- (Loss)/profit before goodwill - 0.6 0.6 Goodwill previously written-off - - -to reserves ---------- ----------- ---------- - 0.6 0.6 Profit/(loss) on disposal of - (0.4) (0.4)fixed assets ---------- ----------- ---------- Profit/(loss) on ordinaryactivities before interest 141.7 (16.8) 124.9 Net interest payable: ---------- ----------- ----------Group (18.4) - (18.4) Joint ventures and associates (10.8) - (10.8) ---------- ----------- ---------- (29.2) - (29.2) ---------- ----------- ----------Profit/(loss) on ordinaryactivities before taxation 112.5 (16.8) 95.7 Taxation on profit/(loss) onordinary activities 3 (36.0) 1.1 (34.9) ---------- ----------- ---------- Profit/(loss) on ordinaryactivities after taxation 76.5 (15.7) 60.8 ========== =========== Equity minority interests (0.8) ---------- Profit for the year 60.0 Dividends 4 (30.7) ---------- Retained (loss)/profit for the 29.3year ========== Earnings per ordinary share: 5 Basic 25.8p 20.4p Diluted 25.3p 20.0p Dividends per ordinary share 4 10.5p CONSOLIDATED BALANCE SHEET 2003 2004 (as restated) £ million £ million Fixed assets Intangible assets 341.2 342.1 Tangible assets 187.1 207.0 ----------- ----------- 528.3 549.1 ----------- ----------- Investments: Joint ventures: ----------- ----------- Share of gross assets 709.7 639.7 Share of gross liabilities (634.1) (585.6) ----------- ----------- 75.6 54.1 Associates - 12.7 Other 37.5 30.3 ----------- ----------- 113.1 97.1 ----------- ----------- 641.4 646.2 ----------- ----------- Current assets Stocks 91.4 102.0 Debtors: amounts falling due within one 1,723.5 1,541.6year Debtors: amounts falling due after one 184.3 177.6year Cash at bank and in hand 299.5 364.8 ----------- ----------- 2,298.7 2,186.0 Creditors: amounts falling due within one (1,968.1) (1,919.1)year ----------- ----------- Net current assets 330.6 266.9 ----------- ----------- Total assets less current liabilities 972.0 913.1 Creditors: amounts falling due after one (644.1) (587.3)year Provisions for liabilities and charges (59.8) (57.3) ----------- ----------- Net assets 268.1 268.5 =========== =========== Capital and reserves Called up share capital 151.0 149.6 Share premium account 88.8 82.8 Revaluation reserve 20.1 11.1 Capital redemption reserve 17.2 17.2 Profit and loss account (12.3) 0.4 ----------- ----------- Shareholders' funds 264.8 261.1 Equity minority interests 3.3 7.4 ----------- ----------- Capital employed 268.1 268.5 =========== =========== SUMMARY CONSOLIDATED CASH FLOW STATEMENT Notes 2004 2003 £ million £ million Net cash flow from operating activities 8 19.4 97.9 Dividends from joint ventures and 0.2 4.3associates Returns on investment and servicing of (17.5) (12.9)finance Taxation (26.6) (30.6) Capital expenditure 1.4 (18.8) Acquisitions and disposals (11.4) (181.1) Dividends paid to equity shareholders (30.8) (28.9) ----------- ---------- Net cash flow before management of liquidresources and financing (65.3) (170.1) Management of liquid resources 32.8 (20.2) Financing (0.8) 285.8 ----------- ---------- (Decrease)/increase in cash (33.3) 95.5 =========== ========== Reconciliation of net cash flow to movementin net funds (Decrease)/increase in cash (33.3) 95.5 Cash flow from movement in debt 1.7 (291.3) Cash flow from movement in liquid (32.8) 20.2resources ----------- ---------- Change in funds resulting from cash flows (64.4) (175.6) Exchange and other movements (1.2) (5.2) ----------- ---------- Movement in net funds in the year (65.6) (180.8) Net funds as at 1 January (218.1) (37.3) ----------- ---------- Net funds as at 31 December (283.7) (218.1) =========== ========== Analysis of net funds Cash at bank and in hand 214.5 243.8 Overdrafts (29.5) (22.9) Debt due within one year (16.5) (86.9) Debt due after one year (537.2) (473.1) Liquid resources 85.0 121.0 ----------- ---------- (283.7) (218.1) =========== ========== NOTES 1. PREPARATION OF PRELIMINARY RESULTS The preliminary results have been prepared on the basis of the accountingpolicies set out in AMEC's annual report and accounts for the year ended 31December 2003 except as noted below: In order to conform with the requirements of UITF Abstract 38 "Accounting forESOP trusts" and the amendment to UITF Abstract 17 "Employee share schemes",investments in AMEC plc ordinary shares of 50 pence each held by the trustees ofthe Long-Term Incentive Plan and Performance Share Plan 2002 are recorded as adeduction in arriving at shareholders' funds. Previously these shares were shownwithin investments. This change has no impact on the profit and loss account orthe statement of total recognised gains or losses for either the prior year orthe year under review. AMEC acquired the outstanding 54 per cent interest in SPIE on 5 March 2003 afterwhich it was fully consolidated in the accounts. Additional reviews of the SPIEbalance sheet have resulted in the reallocation of amounts held within certainbalance sheet captions as at 31 December 2003. These changes provide additionalconsistency in the presentation of debtors and creditors and have no impact onthe net assets of the group. A new segmental format showing the nature of the group's total turnover, totaloperating profit and net assets has been adopted. The segments reflect thechanges to the composition of the group in 2004 arising from the exit of lowmargin, high risk construction activities. In addition, the company wasreclassified as a Support Services company in November 2004 and the newsegmental format is expected to enhance the clarity of the group's reporting andshould lead to a greater understanding of its activities. The preliminary results were approved by the board of directors on 10 March 2005and are audited. The financial information for the years ended 31 December 2004 and 2003 set outabove does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. Statutory accounts for the year ended 31 December2003 have been delivered to the Registrar of Companies. The accounts for theyear ended 31 December 2004 will be delivered to the Registrar of Companiesfollowing the annual general meeting. The company's auditors, KPMG Audit Plc,have reported on the 2004 and 2003 accounts under section 235(1) of the Act.These reports were not qualified within the meaning of section 235(2) of the Actand did not contain statements made under section 237(2) and section 237(3) ofthe Act. The annual report and accounts for the year ended 31 December 2004 will beposted to shareholders on 18 April 2005. The Annual General Meeting will take place on 18 May 2005. The final dividend will be payable on 1 July 2005 to shareholders on theregister at the close of business on 13 May 2005. Interim and preliminary announcements notified to the London Stock Exchange areavailable on the internet at www.amec.com Copies of annual reports and accountsare also available from: WILink, Hook Rise South, Surbiton, Surrey, KT6 7LD. 2. ANALYSIS OF TOTAL TURNOVER, TOTAL OPERATING PROFIT/(LOSS) (BEFORE GOODWILLAMORTISATION AND EXCEPTIONAL ITEMS) AND NET ASSETS Total turnover Total operating profit/ (loss) 2004 2003 2004 2003 £ million £ million £ million £ million Class of business: Engineering and Technical 2,293.8 1,952.7 75.3 69.8Services Oil and Gas 1,212.1 1,350.0 57.2 58.2 Project Solutions 1,368.4 1,487.1 41.4 40.2 ---------- --------- --------- --------- 4,874.3 4,789.8 173.9 168.2 Internal turnover (57.9) (77.1) - -Corporate costs - - (24.3) (26.5) ---------- --------- --------- --------- 4,816.4 4,712.7 149.6 141.7 ========== ========= ========= ========= Geographical origin: United Kingdom 1,974.8 2,109.6 89.2 94.8Rest of Europe 1,651.3 1,379.6 46.4 43.1 Americas 690.2 749.3 15.3 9.1Rest of the world 500.1 474.2 23.0 21.2 ---------- --------- --------- --------- 4,816.4 4,712.7 173.9 168.2Corporate costs - - (24.3) (26.5) ---------- --------- --------- --------- 4,816.4 4,712.7 149.6 141.7 ========== ========= ========= ========= Net assets 2004 2003 £ million £ million Class of business: Engineering and Technical Services (8.1) 27.2 Oil and Gas 129.2 76.5Project Solutions 65.9 10.3 ---------- ---------- 187.0 114.0Goodwill capitalised 341.2 342.1Net debt (283.7) (218.1)Unallocated net assets 23.6 30.5 ---------- ---------- 268.1 268.5 ========== ========== Geographical origin: United Kingdom 67.2 46.3Rest of Europe (10.9) (26.3)Americas 109.9 100.6Rest of the world 20.8 (6.6) ---------- ---------- 187.0 114.0Goodwill capitalised 341.2 342.1Net debt (283.7) (218.1)Unallocated net assets 23.6 30.5 ---------- ---------- 268.1 268.5 ========== ========== 3. TAXATION ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES 2004 2003 £ million £ million UK corporation taxation at 30% (2003: 30%) 20.8 16.6Double taxation relief (2.7) (0.9)Overseas taxation 17.7 21.1Joint ventures' and associates' taxation (1.8) (1.4) ---------- ---------- 34.0 35.4UK deferred taxation at 30% (2003: 30%) 1.7 (2.6)Overseas deferred taxation 3.2 -Joint ventures' and associates' deferred taxation 4.2 2.1 ---------- ---------- 43.1 34.9 ---------- ---------- Included within the current tax charge is £4.4 million (2003: credit of £1.1million) in respect of exceptional items. 4. DIVIDENDS 2004 2003 2004 2003 pence pence £ million £ millionOrdinary shares:Interim dividend paid 3 January 3.8 3.6 11.3 10.62005Final recommended dividend 7.2 6.9 23.5 20.1 --------- --------- --------- --------- 11.0 10.5 34.8 30.7 --------- --------- --------- --------- It is proposed that the final recommended dividend will be paid on 1 July 2005to members on the register at the close of business on 13 May 2005. 5. EARNINGS PER ORDINARY SHARE In order to appreciate the effects of goodwill amortisation and exceptionalitems (net of attributable tax) on the reported underlying performance,additional calculations of earnings per ordinary share have been presented. Basic earnings per ordinary share, before goodwill amortisation and exceptionalitems, have been calculated on earnings of £78.6 million divided by the averagenumber of ordinary shares in issue during the year of 295.0 million. Basic earnings per ordinary share, after goodwill amortisation and exceptionalitems, have been calculated on earnings of £21.8 million divided by the averagenumber of ordinary shares in issue during the year of 295.0 million. Diluted earnings per ordinary share, before goodwill amortisation andexceptional items, have been calculated on earnings of £78.6 million and afterincluding the effect of all dilutive potential ordinary shares, which increasesthe average number of ordinary shares in issue during the year to 303.2 million. Diluted earnings per ordinary share, after goodwill amortisation and exceptionalitems, have been calculated on earnings of £21.8 million and after including theeffect of all dilutive potential ordinary shares, which increases the averagenumber of ordinary shares in issue during the year to 303.2 million. 6. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2004 2003 £ million £ million Profit for the year 21.8 60.0 Exchange and other movements (11.8) (2.3)Adjustment arising from the full consolidation of SPIE - (12.1)Surplus on property revaluation 9.6 - ---------- ---------- Total gains and losses relating to the year 19.6 45.6 ========== ========== 7. RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 2004 2003 £ million £ million Profit for the year 21.8 60.0 Dividends (34.8) (30.7) ---------- ---------- Retained (loss)/profit for the year (13.0) 29.3 Exchange and other movements (11.8) (2.3) Shares issued 7.4 0.4 Adjustment arising from the full consolidation of SPIE - (12.1) Surplus on property revaluation 9.6 - Goodwill written back on disposal or closure of 13.0 -operations Movements relating to the Long-Term Incentive Plan and Performance Share Plan 2002 (1.5) (1.8) ---------- ---------- Net increase in shareholders' funds 3.7 13.5 Shareholders' funds as at 1 January 261.1 247.6 ---------- ---------- Shareholders' funds as at 31 December 264.8 261.1 ========== ========== Shareholders' funds as at 31 December 2002 were £251.8 million and have beenamended to incorporate a prior year adjustment of £4.2 million which arose onthe adoption of UITF Abstract 38 "Accounting for ESOP trusts" and the amendmentof UITF Abstract 17 "Employee share schemes". 8. RECONCILIATION OF GROUP OPERATING PROFIT TO NET CASH FLOW FROM OPERATINGACTIVITIES 2004 2003 £ million £ million Group operating profit 104.9 112.2 Goodwill amortisation 21.6 16.3Depreciation 39.8 47.8Decrease/(increase) in stocks 10.0 (0.3)(Increase)/decrease in debtors (206.2) 307.7Increase/(decrease) in creditors and provisions 52.0 (382.2)Exchange and other movements (2.7) (3.6) ---------- ---------- Net cash flow from operating activities 19.4 97.9 ========== ========== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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