14th Mar 2007 07:03
AMEC PLC14 March 2007 14 March 2007 AMEC plc Preliminary Results 2006 STRATEGY AND TARGETS CLEARLY IDENTIFIED DIVESTMENT OF NON-CORE BUSINESSES WELL UNDER WAY Strategy • Core businesses identified in energy and industrial markets • Deliver margin targets of 6% in 2008; 8% in 2010 • Exit non-core businesses Financial highlights*: • Revenue growth 14% • Pre-tax profit before exceptional items £64.7m (2005 £73.9m) reflects losses in Construction • Average net cash 1 August to 31 December 2006 £190m • Directors' valuation of PPP portfolio £132m (2005: £109m) • Dividends 12.2p (2005: 11.5p) Outlook 2007/2008 • Core business end markets are strong • Implementation of STEP Change in 2007; recurring net benefits of £40m from 2008 • Progressing towards 6% margin - target expected to be achieved in 2008 • Divestment of core businesses expected by year-end 2007 Commenting today, Chief Executive, Samir Brikho, said: "After a year of great change and challenge, I am pleased to report results thatare in line with our expectations at the time of our December update, with nounexpected or negative developments in the legacy issues that have for so longdominated perceptions about AMEC." "As we move through 2007 and into 2008 strong prospects in the core energybusinesses are combined with real progress in our cost cutting, with netbenefits of £40 million from 2008 onwards. I am confident that with this STEPChange, divestment programmes and balance sheet strength, we are well on-trackto deliver on our new strategy and to create real value for shareholders." * Unless otherwise stated, amounts and percentage movements throughout this document relating to the income statement are stated for continuing operations before intangible amortisation and pre-tax exceptional items but including joint venture profit after tax. Financial highlights*: 2006 2005 £ million £ millionContinuing operations: Revenue 3,229.2 2,843.8 +14% Profit before intangible amortisation, exceptional items and income tax 64.7 73.9 -12% Loss before income tax (108.8) (17.7) nm Profit from discontinued operations 319.1 22.1 nm Diluted earnings per share from continuingoperations before intangible amortisation andexceptional items. 14.5p 17.5p -17% Diluted earnings per share 66.9p 1.3p nm Dividends per share 12.2p 11.5p +6% nm not meaningful 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 of 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. An interview with Samir Brikho, AMEC chief executive, is available in video,audio and text formats on AMEC's web site www.amec.com A webcast of the preliminary results presentation and presentation slides willbe made available on www.amec.com during the course of the day. Enquiries to:AMEC plc: + 44 (0)20 7634 0000 Analysts and investors:Samir Brikho, Chief ExecutiveStuart Siddall, Finance DirectorNeil Jamieson, Director of Investor Relations Media:Charles Reynolds, Head of Media Relations * Unless otherwise stated, amounts and percentage movements throughout this document relating to the income statement are for continuing operations and stated before intangible amortisation of £3.6m (2005: £4.5m) and pre-tax exceptional charges of £169.9m (2005: £87.1m) but including joint venture profit after tax of £9.8m (2005: £11.0m). STRATEGY AMEC's vision is to be a leading supplier of high value consultancy, engineeringand project management services to defined market segments within the world's energy and industrial process industries. The group's core businesses are: •Oil and Gas Services •Nuclear •Oil Sands (engineering and infrastructure) •Earth and Environmental •Minerals and Metals Mining •Wind Energy •Industrial These businesses generated aggregate 2006 revenues of £2.1 billion (2005: £1.8billion) An important goal for AMEC is a long-term operating margin target ofaround 8% in 2010. Divestment of non-core businesses AMEC has commenced the divestment process for the non-core businesses identifiedin its December 2006 announcement: •Building and Civil Engineering •Building and Facilities Services •Property Developme •PPP These Built Environment businesses, together with various specialist activities*generated 2006 revenues of £1.1 billion (2005: £1.0 billion) and losses of £11.6 million** (2005: profits of £12.9 million). In February 2007, AMEC announced the sale of its 50% interest in AMEC SPIE Rail Remaining non-core businesses will be divested as quickly as possible during 2007 consistent with optimising value. * Excluding the pipeline construction businesses which are classified as discontinued in 2006 ** Pro forma analysis for 2006 and 2005. Loss / profit is before net financing costs but including joint venture profit before tax. Share buyback programme In December 2006, AMEC announced its intention to return up to £100 million to shareholders by way of a share buyback programme. To date 350,000 shares have been bought in the market to be held in treasury at a price of approximately 420 pence per share. The board intends that further buybacks should be made during the course of 2007. STEP Change In October 2006, AMEC launched "STEP Change", a programme of change in thestructure and culture of the company, which has substantial cost savingstargets. The programme will be completed by the end of 2007 and recurring netbenefits of around £40 million for the group overall are expected from 2008onwards. AMEC is on track to achieve 2008 targets in its core businesses. Board changes Mr J.A.Dallas has decided to stand down as a non-executive director of AMEC plcat the conclusion of the Annual General Meeting to be held on Wednesday 16 May2007. Mr Dallas has been a director since 28 October 1999. PRELIMINARY RESULTS 2006 Basis of preparation and discontinued activities In July 2006, AMEC SPIE was sold for a cash consideration of €1 billion. During2006, AMEC decided to exit from pipelines construction as a line of business.The sale process of the pipelines construction companies is ongoing. As aresult, both AMEC SPIE and pipelines construction are treated as discontinuedoperations in 2006. Due to the timing of AMEC's announcement to divest its non-core BuiltEnvironment activities, these businesses did not meet the criteria under IFRS5to be classified as either held for sale or discontinued as at 31 December 2006.The results of these businesses are therefore included within continuingoperations in the 2006 accounts. Financial highlights - continuing operations Revenue for year increased by 14 per cent to £3,229.2 million, (2005: £2,843.8million) reflecting growth throughout the Energy and Process businesses. Pre-tax profit from continuing operations of £64.7 million in 2006 was belowboth 2005 (£73.9 million) and the board's original expectations for the year.The result was in line with the board's expectations following AMEC's tradingupdate in December 2006. Strong performance in Natural Resources and Earth andEnvironmental, together with a substantial profit from the sale of a PPP assetduring the year, was not sufficient to offset reduced profit in Power andProcess and continued Construction losses. There was a pre-tax exceptional charge of £169.9 million (2005: £87.1 million)and intangible amortisation of £3.6 million (2005: £4.5 million), resulting in apre-tax loss of £108.8 million (2005: loss of £17.7 million). Diluted earnings per share from continuing operations were 3.0 pence lower thanin 2005 at 14.5 pence (2005: 17.5 pence). Proposed dividends for the year areincreased by six per cent to 12.2 pence per share (2005: 11.5 pence). Outlook 2007 Core business end markets are strong and a return to profitability is expectedin UK Built Environment. Costs of implementing the STEP Change programme will be largely incurred earlyin the year, with related benefits being generated in the second half. The board's expectations for 2007 are for: • Divestment of AMEC's non-core businesses • Strong performance in core businesses • £12m incremental benefit from full year of interest AMEC SPIE proceeds • £20m benefits from STEP Change balanced by one-off costs of about £20m • Reduced profit from joint venture activities in Iraq will moderate progress Outlook 2008 Longer-term prospects for the group's core business end markets are strong. Theboard expects the core businesses to achieve the 6 per cent margin targeted in2008 and 8 per cent in 2010. SEGMENTAL REVIEW Amounts and percentage movements relating to segmental activities are stated forcontinuing operations and before corporate costs of £20.2m (2005: £19.9m),intangible amortisation of £3.6m (2005: £4.5m) and pre-tax exceptional chargesof £169.9m (2005: £87.1m), but including joint venture profit before tax of£14.8m (2005: £15.7m). Amounts relating to segmental net assets / (liabilities) are stated beforeintangible assets and net cash, but including interests in joint ventures andassociates. Commentary for each of AMEC's principal segments of activity is set out below. Natural Resources Natural Resources comprises AMEC's activities in Oil and Gas Services, Oil Sands(engineering and infrastructure) and Metals and Minerals Mining. Servicesinclude asset development and asset support including consultancy andengineering design, project management, commissioning and operational support. The split of 2006 revenue for each of Natural Resources' three principal areasof activity were as follows: Oil and Gas Services 76 per cent, Oil Sands(engineering and infrastructure) 13 per cent and Metals and Minerals Mining 11per cent. £ million 2006 2005 changeRevenue 920.9 870.6 +6%Profit before net financing costs 55.0 47.0 +17%Margin 6.0% 5.4% +0.6pts------------------ ---------- ---------- -----------Net assets 72.6 86.2 -16%Order book £1.03bn £0.98bn +5%Average number of employees 6,750 5,750 +17% The Natural Resources business has withdrawn from lump-sum fabrication. Thisactivity, with sales of £102.9 million and £244.1 million in 2006 and 2005respectively, generated no trading margin in either year. Substantially allmonies due to AMEC from lump-sum fabrication projects have now been paid.Commentary below excludes this activity. Revenue for the period increased by 31 per cent to £818 million, being driven bystrength in the Oil and Gas Services, Oil Sands and Mining and Metals businessesin the Americas, together with UK asset support activities. Profit increased by 17 per cent to £55.0 million (2005: £47.0 million). Marginof 6.7 per cent (2005: 7.5 per cent) reflected lower than expected incentivepayments on a Russian project and compared with a strong performance in 2005,which benefited from favourable project completions. The Natural Resources order book was increased despite strong growth in salesduring 2006. Natural Resources outlook 2007 In Oil and Gas Services, activity levels in UK North Sea are expected to remainhigh, with continued strength in brownfield developments and other asset supportservices. Major opportunities are being pursued in frontier regions and somesuccesses are anticipated during 2007. The Canadian oil sands market for engineering services is expected to remainstrong, being driven by increasing levels of investment. Performance in the OilSands Infrastructure business, which peaked in 2006, is expected to temperoverall growth in the Oil Sands division. Good growth is expected to continue in the North American Mining sector. This,together with increased activity in South America is expected to result inanother strong year for the Mining business in 2007. STEP Change As a result of the STEP Change and Operational Excellence programmes mentionedabove, the Natural Resources business is targeting 2008 margin of 7-8 per cent. Power and Process Power and Process includes AMEC's activities in UK and North American industrialand power markets and nuclear. The business designs, delivers, enhances andmaintains infrastructure for a broad range of clients in the public and privatesectors. The split of 2006 revenue for each of the three principal areas of activity inPower and Process were as follows: UK industrial 45 per cent, North Americanindustrial 33 per cent (including joint venture activities in Iraq), and nuclear22 per cent. £ million 2006 2005 changeRevenue 817.4 602.9 +36%Profit before net financing costs 30.4 36.7 -17%Margin 3.7% 6.1% -2.4pts------------------- ----------- ----------- ----------Net (liabilities)/assets (19.9) 41.3 nm Order book £1.46bn £1.07bn +36% Average number of employees 5,600 4,450 +26% nm: not meaningful Revenue for the period increased by 36 per cent to £817.4 million (2005: £602.9 million), with revenue from US Industrial doubling and a 26 per cent increase in UK Industrial. Power and Process also benefited from a full year of sales from the nuclear engineering services business NNC, which was acquired in July 2005. Growth in these areas was offset by the expected reduction in joint venture revenues in Iraq, which fell from £163.0 million in 2005 to £63.4 million. All joint venture contracts in Iraq were substantially complete by the end of 2006. Profit for the period was £30.4 million (2005: £36.7 million) and margin 3.7 percent (2005: 6.1 per cent). The decline in margin principally reflected lowermargin on contracts secured during 2004/5, together with low profit take on thehigh volume of sales associated with early stages on industrial projects.Performance also reflected the expected significant reduction of joint ventureearnings in Iraq during 2006, which fell from £13.6 million in 2005 to £7.0million. The Power and Process order book grew strongly in 2006, increasing by 36 percent to £1.46 billion, reflecting strength in power and process markets on bothsides of the Atlantic. Net liabilities at 31 December 2006 were £19.9 million (31 December 2005: net assets £41.3 million) reflecting good cash performance in North America and reduced levels of capital employed associated with our joint venture activities in Iraq. Power and Process outlook 2007 The industrial businesses in UK and North America are expected to deliver stronggrowth in 2007. With the strong growth that took place in the order book during2006, the industrial business is now more selective in new projects and sets agross margin threshold of 8 per cent on new contracts. This, coupled with higherprofit take on contracts as they pass key milestones is expected to lead toimproved margin performance for 2007. Continued growth is expected in Nuclear, being driven by the refurbishmentproject at Bruce Power in Canada. In the longer term, significant opportunitiesare emerging in nuclear markets in the UK from which AMEC expects to benefit. Overall performance in Power and Process will be tempered by the cessation ofjoint venture activities in Iraq. STEP Change As a result of the STEP Change and Operational Excellence programmes mentionedabove, the Power and Process business is targeting 2008 margin of 5-7 per cent. Earth and Environmental AMEC Earth and Environmental provides specialist environmental, geotechnical,programme management and consultancy services to a broad range of clients in thepublic and private sectors. This business operates from a regional network andis characterised by a large number of small value contracts. £ million 2006 2005 changeRevenue 281.7 270.9 +4%Profit before net financing costs 15.2 14.1 +8%Margin 5.4% 5.2% +0.2pts-------------------- ----------- ---------- ----------Net assets 4.3 16.3 -74% Average number of employees 2,800 2,500 +12% Revenue increased for the period by four per cent to £281.7 million (2005:£270.9 million). Profit increased by eight per cent to £15.2 million (2005:£14.1 million) with margin up to 5.4 per cent (2005: 5.2 per cent). Strength ofSterling tempered reported results in this business, which is predominantlycarried on in North America. Performance reflected growth in the US Federalsector and continuing strength in the Natural Resources sectors in North America. Earth and Environmental outlook 2007 North American markets for environmental services are expected to remain goodand the Earth and Environmental business is expected to deliver another strongperformance in 2007. STEP Change As a result of the STEP Change and Operational Excellence programmes mentionedabove, the Earth and Environmental business is targeting 2008 margin of 6-8 percent. Construction Principal activities of the Construction segment are design, project management,construction and hard facilities management of public and private sector assetsin sectors including healthcare, education, defence, manufacturing andcommercial, principally in the UK. The business has two principal areas of activity in Building and FacilitiesServices and Building and Civil Engineering. The split of 2006 revenues for eachof these areas of activity was 26 per cent and 74 per cent respectively. £ million 2006 2005 change Revenue 1,150.8 1,063.7 +8%(Loss)/profit before net financing costs (27.8) 1.0 nmMargin (2.4)% 0.1% -2.5%--------------------- --------- ------------ --------Net liabilities (283.4) (114.4) -148% Order book £1.18bn £1.48bn -20% Average number of employees 6,100 6,750 -10% nm: not meaningful During the year the business continued to exit certain markets in the UK and US,as previously announced. Revenue increased by eight per cent to £1,150.8 million (2005: £1,063.7million), reflecting activity associated with the 2004/5 order book. Performance in Building and Facilities Services was good, though results for theyear were dominated by other Construction activities, where losses of £35million (2005: losses of £7 million) were reported. These results reflected poorperformance on a number of current contracts and overhead under-recoveries, aspreviously disclosed. Significant actions have been taken in the UK Building andCivil Engineering business to improve performance: a new management team is inplace; the business has become more selective in work performed, resulting inthe order book declining by 23 per cent in the second half; and controls havebeen reinforced. Net liabilities of £283.4 million (31 December 2005: £114.4 million) reflect theexceptional provisions made in 2006 of £144.5 million, which include £90 millionmade in respect of future litigation and settlement costs, largely relating tothe North American activities which are being closed. Construction outlook 2007 The outlook across Building and Facilities Services markets is generally good.Progress in 2007 is expected to be tempered upon completion of the largeTerminal 5 project at London's Heathrow Airport. The focus of the UK Building and Civil Engineering business will be on improvingthe quality of work and decreasing risk. As a result of these actions, thebusiness is expected to deliver a small profit in 2007. Investments The Investments business participates in PPP and urban regeneration projectswhere multiple income streams are generated - from investment, projectmanagement, delivery and maintenance services. The business is focused onhospitals, schools, transport infrastructure, commercial and governmentbuildings and the development of wind farms. 2006 net asset values in each of the business's two main areas of activity were:PPP £59.3 million and Property Developments £53.1 million. £ million 2006 2005 changeRevenue 82.5 56.2 nmProfit before net financing costs* 21.3 16.6 +28%--------------------- ----------- ----------- ---------Net assets 112.4 105.8 +6% Average number of employees 185 145 +28% * Including pre-tax profit of joint ventures nm: not meaningful Profit increased by 28 per cent to £21.3 million (2005: £16.6 million).Performance in both 2005 and 2006 was dominated by substantial profits arisingfrom the sale of two PPP assets. In addition, 2006 saw increased profits fromconcessions. The Wind Energy business continued to develop its portfolio andrecorded a loss of £4 million arising from the development costs that have beenincurred. PPP portfolio valuation The PPP portfolio valuation at 31st December 2006 was £132.1 million (2005:£109.5 million), based on a weighted average discount rate of 9.1 per cent(2005: 10.5 per cent), reflecting the maturing secondary market for PPPconcessions. Net book value of the portfolio at the same date was £69.8 million. The UK portfolio, excluding the Korean concession, is subject to the divestmentprocess for non-core Built Environment businesses. For illustrative purposes, ata discount rate of 6 per cent this portfolio would be valued at around £140million, whilst at 7 per cent the valuation would be £120 million. Investments outlook 2007 The PPP and Property Developments businesses are expected to make satisfactoryprogress in 2007, but profits from the sale of PPP assets are expected to be ata lower level than in 2006. Progress in Wind Energy remains subject to the planning process, but confidenceis building that after a long period of gestation, momentum will increase during2007. FINANCIAL REVIEW Net financing costs Following receipt in August 2006 of the proceeds from the disposal of AMEC SPIE,the group has been in a net cash position. The net financing costs of continuingoperations for the year reduced to £4.2 million (2005: £16.9 million) with abenefit of approximately £17 million from the AMEC SPIE proceeds*. Tax charge The tax charge for the continuing businesses for the year was £14.9 million(2005: £15.7 million). After adjusting for joint ventures, the underlying taxrate was 28.6 per cent** (2005: 26.0 per cent). The underlying tax rate isexpected to remain below 30 per cent for the foreseeable future. Cash flow and current liquidity At 31 December 2006 AMEC had net cash of £355 million (2005: net debt of £245million). Average weekly net cash was £190 million for the period 1 August to 31 December2006, following the receipt of AMEC SPIE disposal proceeds of £684 million. During 2007 the directors expect weekly average net cash to be around £250million before the impact of the ongoing share buy back programme, acquisitionsand disposals. The group's cumulative cash flow# of £306.5 million for the 11 years from 1996was well in excess of cumulative retained profit## of £179.4 million over thesame period. * Including the interest on inter-group borrowings ** Before intangible amortisation # Adjusted cash flow excludes acquisitions, disposals and share transactions, advanced cash, cash retained in SPIE prior to March 2003, non-cash pensions movements and proceeds from securitisation of debtors ## Profit is stated before goodwill write off, amortisation of intangibles and provision for future litigation/settlement costs of £90 million but including dividends charged in the year Pensions The IAS19 pre-tax surplus of principal UK pension schemes at the end of 2006 of£105.6 million was higher than in 2005 (2005: £74.7 million) due mainly to theassets achieving a return higher than the expected increase in the value of theliabilities and additional contributions made by the company. In order to maintain the funding position of the schemes, AMEC increased itscash contributions during 2006 and at the same time offered employees the choiceof either increasing their own contributions to maintain current benefits oraccepting a lower benefit scale. Company contributions of £31.4 million werepaid during the year (2005: £22.8 million). Intangible amortisation and exceptional items Intangible amortisation relates to capitalised software and intangible assetsacquired as part of the acquisitions of NNC and Paragon on 2005. The 2006 chargeof £3.6 million is £0.9 million lower than last year with the reduction due tothe timing of the write off of certain assets related to the acquisition ofParagon in 2005. Exceptional provisions were made in 2005 relating to AMEC's exit from lump sumfabrication work in the upstream (Natural Resources) and other markets (Powerand Process). In 2006 further provisions (£25 million) were made, reflectingsettlement of the major final accounts for upstream fabrication and the ongoingarbitration on a completed overseas Power and Process project. In 2005, exceptional provisions were also made for the costs of withdrawing fromcertain loss-making construction markets in the UK and US. In the first half of2006 AMEC made additional provisions for the completion of ongoing constructionprojects, litigation and other costs totalling £57 million (Construction). In the latter part of 2006 and following negative developments on several majordisputes, AMEC made further provisions of £68 million, largely, in respect offuture settlement and litigation costs. These provisions reflect the view thatAMEC should seek to settle these disputes. Where settlement cannot be secured ona reasonable basis, AMEC will continue to defend its position. In addition, impairment and other provisions associated with a concrete segmentsbusiness of £15 million were made together with costs of £4 million associatedwith the potential separation of the Energy and Process activities from theBuilt Environment activities. The net exceptional post-tax credit of £165.4 million for 2006 is set out innote 4 below. CONSOLIDATED INCOME STATEMENT 2006 Exceptional Exceptional charges profits/costs arising from of exiting Before litigation and businesses exceptional separation and markets items costs (note 4) (note 4) Total Note £ million £ million £ million £ million Continuing operations Revenue 2 3,229.2 - - 3,229.2 Cost of sales (2,934.6) (32.2) (29.9) (2,996.7) -------- ---------- --------- ---------Gross profit/(loss) 294.6 (32.2) (29.9) 232.5 Administrative (239.1) - - (239.1)expenses Loss on businessdisposals andclosures - (45.8) (62.0) (107.8) -------- ---------- --------- ---------Profit/(loss) beforenet financing costs 2 55.5 (78.0) (91.9) (114.4) -------- ---------- --------- ---------Financial income 12.2 - - 12.2Financial expense (16.4) - - (16.4) -------- ---------- --------- ---------Net financing costs (4.2) - - (4.2) Share of post-taxresults of jointventures and associates 9.8 - - 9.8 -------- ---------- --------- ---------Profit/(loss) beforeincome tax 61.1 (78.0) (91.9) (108.8) Income tax 5 (14.9) 9.8 14.0 8.9 -------- ---------- --------- ---------Profit/(loss) forthe year fromcontinuing operations 46.2 (68.2) (77.9) (99.9) Profit for the yearfrom discontinued 6 7.6 - 311.5 319.1operations -------- ---------- --------- ---------Profit/(loss) forthe year 53.8 (68.2) 233.6 219.2 ======== ========== ========= ========= Attributable to:Equity holders ofthe company 218.1Minority interests 1.1 --------- 219.2 =========Basic (loss)/earnings per share: 7Continuing operations (31.0)pDiscontinued operations 97.9 p --------- 66.9 p =========Diluted (loss)/earnings per share: 7Continuing operations (31.0)pDiscontinued operations 97.9 p --------- 66.9 p ========= Dividends per share: 8 12.2 p ========= CONSOLIDATED INCOME STATEMENT 2005 Exceptional Exceptional charges profits/costs arising from of exiting Before litigation and businesses exceptional separation and markets items costs (note 4) (note 4) Total Note £ million £ million £ million £ million Continuing operations Revenue 2 2,843.8 - - 2,843.8 Cost of sales (2,574.7) (1.0) (25.2) (2,600.9) ---------- ---------- --------- ---------Gross profit/(loss) 269.1 (1.0) (25.2) 242.9 Administrative expenses (193.8) - - (193.8)Loss on businessdisposals andclosures - (4.1) (56.8) (60.9) -------- ---------- --------- ---------Profit/(loss) beforenet financing costs 2 75.3 (5.1) (82.0) (11.8) -------- ---------- --------- ---------Financial income 11.7 - - 11.7Financial expense (28.6) - - (28.6) -------- ---------- --------- ---------Net financing costs (16.9) - - (16.9) Share of post-taxresults of jointventures and associates 11.0 - - 11.0 -------- ---------- --------- ---------Profit/(loss) beforeincome tax 69.4 (5.1) (82.0) (17.7) Income tax 5 (15.7) - 15.0 (0.7) -------- ---------- --------- ---------Profit/(loss) forthe year fromcontinuing operations 53.7 (5.1) (67.0) (18.4) Profit/(loss) forthe year fromdiscontinued operations 6 24.5 - (2.4) 22.1 -------- ---------- --------- ---------Profit/(loss) forthe year 78.2 (5.1) (69.4) 3.7 ======== ========== ========= ========= Attributable to:Equity holders ofthe company 4.0Minority interests (0.3) --------- 3.7 =========Basic (loss)/earnings per share: 7Continuing operations (5.6)pDiscontinued operations 6.9 p --------- 1.3 p =========Diluted (loss)/earnings per share: 7Continuing operations (5.6)pDiscontinued operations 6.9 p --------- 1.3 p =========Dividends per share: 8 11.5 p ========= CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 2006 2005 Note £ million £ million Exchange movements on translation offoreign subsidiaries (37.4) 44.4 Actuarial gains/(losses) on definedbenefit pension schemes 2.9 (56.7) Group share of actuarial gains on definedbenefitpension scheme within associate (net of tax) 1.8 - Net gain/(loss) on hedges of netinvestment in foreign subsidiaries 16.4 (12.0) Cash flow hedges:Effective portion of changes in fair value 12.5 (3.8)Transferred to the income statement - (1.0)Group share of change in fair value ofcash flow hedges within joint venture entities(net of tax) 5.0 (8.0) Tax in respect of items recogniseddirectly in equity (6.5) 18.3 ---------- ---------Net expense recognised directly inequity (5.3) (18.8) Profit for the year 219.2 3.7 ---------- ---------Total recognised income and expensefor the year 213.9 (15.1) ========== ========= Attributable to:Equity holders of the company 9 211.3 (12.1)Minority interests 2.6 (3.0) ---------- ---------Total recognised income and expensefor the year 213.9 (15.1) ========== ========= CONSOLIDATED BALANCE SHEET Note 31 December 31 December 2006 2005 £ million £ millionASSETS Non-current assetsProperty, plant and equipment 73.3 158.3Intangible assets 197.6 477.9Interests in joint venturesand associates 85.2 85.0Other investments 0.9 4.5Other receivables - 24.0Retirement benefit assets 105.6 74.7Deferred tax assets 16.4 70.9 ------------ -------------Total non-current assets 479.0 895.3 ------------ ------------- Current assetsInventories 47.7 73.8Trade and other receivables 806.3 1,884.2Derivative financialinstruments 9.0 0.8Cash and cash equivalents 375.4 351.9Assets classified as held for sale 107.1 - ------------ -------------Total current assets 1,345.5 2,310.7 ------------ -------------Total assets 1,824.5 3,206.0 ------------ ------------- LIABILITIESCurrent liabilitiesBank loans and overdrafts (13.6) (39.1)Trade and other payables (1,021.4) (2,007.7)Derivative financialinstruments (1.9) (3.3)Current tax payable (19.3) (56.1)Liabilities classified asheld for sale (69.5) - ------------ -------------Total current liabilities (1,125.7) (2,106.2) ------------ ------------- Non-current liabilitiesBank loans (6.9) (558.3)Trade and other payables - (73.7)Derivative financialinstruments - (13.0)Retirement benefitliabilities (13.0) (56.2)Deferred tax liabilities (10.3) (47.1)Provisions (173.8) (28.6) ------------ -------------Total non-currentliabilities (204.0) (776.9) ------------ -------------Total liabilities (1,329.7) (2,883.1) ------------ -------------Net assets 2 494.8 322.9 ============ ============= TOTAL EQUITYShare capital 166.8 166.4Share premium account 90.7 89.5Hedging and translationreserves (20.5) (5.8)Capital redemption reserve 17.2 17.2Retained earnings 238.9 55.3Amounts recognised in equity relating toassets and liabilities held for sale 0.9 - ------------ -------------Total equity attributableto equity holders of parent 9 494.0 322.6 Minority interests 0.8 0.3 ------------ -------------Total equity 494.8 322.9 ============ ============= CONSOLIDATED CASH FLOW STATEMENT 2006 2005 Note £ million £ million Cash flow from operating activitiesLoss before income tax from continuingoperations (108.8) (17.7)Profit before income tax fromdiscontinued operations 323.1 40.7 -------- ---------Profit before income tax 214.3 23.0Financial income (18.5) (22.3)Financial expense 28.3 44.1Share of post-tax results of jointventures and associates (11.7) (8.1)Intangible amortisation 6.2 6.0Depreciation 35.1 38.4Impairment of investment 7.1 -Profit on disposal of subsidiaries (301.8) -Profit on disposal of property, plant andequipment (1.6) (9.5)Equity settled share-based payments (2.3) 7.9 -------- --------- (44.9) 79.5 Decrease in inventories 12.7 21.9Decrease/(increase) in trade and otherreceivables 112.3 (30.5)Increase in trade and other payables andprovisions 21.6 70.6 -------- --------- Cash generated from operations 101.7 141.5 Interest paid (36.8) (43.7)Tax refunds received 9.5 3.9 -------- ---------Net cash flow from operating activities 74.4 101.7 -------- ---------Cash flow from investing activitiesAcquisition of subsidiaries, net of cashacquired (15.0) (57.8)Acquisition of joint ventures, associatesand other investments (23.5) (25.0)Purchase of property, plant and equipment (38.2) (55.4)Purchase of intangible assets (0.6) (9.3)Disposal of subsidiaries (net of cashdisposed of) 627.4 -Disposal of joint ventures, associatesand other investments 27.2 10.0Disposal of property, plant and equipment 26.5 16.9Interest received 19.0 23.2Dividends received from joint venturesand associates 3.2 3.5 -------- ---------Net cash flow from investing activities 626.0 (93.9) -------- ---------Net cash flow before financing activities 700.4 7.8 -------- ---------Cash flow from financing activitiesProceeds from shares issued 1.6 89.7Proceeds from new loans - 5.8Repayment of loans (549.9) -Dividends paid (37.5) (34.5)Disposal/(acquisition) of shares by trustees of thePerformance Share Plan 2002 2.2 (8.7) -------- ---------Net cash flow from financing activities (583.6) 52.3 -------- --------- Increase in cash and cash equivalents 116.8 60.1Cash and cash equivalents as at thebeginning of the year 10 332.7 270.0Exchange (losses)/gains on cash and cashequivalents (12.8) 2.6Cash of former subsidiary equity accounted from thebeginning of the year (30.3) - -------- ---------Cash and cash equivalents as at the endof the year 10 406.4 332.7 ======== =========Cash and cash equivalents consist of:Cash at bank and in hand 336.2 320.8Short-term investments 39.2 31.1 -------- --------- 375.4 351.9Overdrafts (1.2) (19.2) -------- --------- 374.2 332.7Cash and cash equivalents (including overdrafts)classified as held for sale 32.2 - -------- ---------Cash and cash equivalents 10 406.4 332.7 ======== ========= NOTES 1. BASIS OF PREPARATION In accordance with EU law (IAS Regulation EC 1606/2002), the preliminary resultshave been prepared in accordance with International Financial ReportingStandards ("IFRS") adopted for use in the EU as at 31 December 2006 ("adoptedIFRS"), International Financial Reporting Interpretations Committee ("IFRIC")interpretations and those parts of the Companies Act 1985 applicable tocompanies reporting under IFRS. IFRS 7 "Financial instruments: disclosure" was available for early adoption buthas not been adopted by the group in the consolidated accounts. The applicationof IFRS 7 in 2006 would not have affected the balance sheet or income taxstatement as the standard is concerned only with disclosure. The group plans toadopt IFRS 7 in 2007. During 2006 IFRIC 12 on service concession arrangements was issued. Thisinterpretation is effective with effect from 1 January 2008, but this has yet tobe adopted for use in the EU. In view of this, the directors consider that itremains appropriate to apply the approach set out in Application Note F of theUK Financial Reporting Standard 5 "Reporting the substance of transactions" indetermining the accounting model to be applied to AMEC's PPP activities. Thisinvolves applying a "risks and rewards" test to determine whether a non-currentasset or finance debtor model should be followed. The directors do not expectthis accounting policy to be significantly different to that under IFRIC 12. The financial information for the years ended 31 December 2006 and 2005 set outabove does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985 ("the Act"). Statutory accounts for the year ended 31December 2005, which were prepared under IFRS, have been delivered to theRegistrar of Companies. The accounts for the year ended 31 December 2006 will bedelivered to the Registrar of Companies following the Annual General Meeting.The company's auditors, KPMG Audit Plc, have reported on the 2006 and 2005accounts under section 235(1) of the Act. These reports were not qualifiedwithin the meaning of section 235(2) of the Act and did not contain statementsmade under section 237(2) and section 237(3) of the Act. The annual report and accounts for the year ended 31 December 2006 will beposted to shareholders on 17 April 2007. The results for 2006 were approved by the board of directors on 14 March 2007and are audited. The Annual General Meeting will take place on 16 May 2007. The final dividend will be payable on 2 July 2007 to shareholders on theregister at the close of business on 11 May 2007. Interim and preliminary announcements notified to the London Stock Exchange areavailable on the internet at www.amec.com. 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE FINANCING COSTS AND NET ASSETS The segmental review on pages 5 to 11 is based on the reported results beforeintangible amortisation and exceptional items but including joint venture profitbefore tax. The results as presented in the segmental review are reconciled tothose presented in the following tables on pages 21 to 22. Profit/(loss) before net Revenue financing costs 2006 2005 2006 2005 £ million £ million £ million £ millionClass of business:Natural Resources 920.9 870.6 44.8 37.0Power and Process 817.4 602.9 10.6 23.3Earth and Environmental 281.7 270.9 14.7 13.9Construction 1,150.8 1,063.7 (173.5) (74.6)Investments 82.5 56.2 9.2 8.5 -------- -------- ------- -------- 3,253.3 2,864.3 (94.2) 8.1Internal revenue (24.1) (20.5) - -Corporate costs - - (20.2) (19.9) -------- -------- ------- -------- 3,229.2 2,843.8 (114.4) (11.8) ======== ======== ======= ======== Geographical origin:United Kingdom 1,954.7 1,611.5 (84.1) 4.9Rest of Europe 55.4 50.9 6.5 5.2Americas 1,018.6 855.8 (30.6) 3.7Rest of the world 200.5 325.6 14.0 (5.7) -------- -------- ------- -------- 3,229.2 2,843.8 (94.2) 8.1Corporate costs - - (20.2) (19.9) -------- -------- ------- -------- 3,229.2 2,843.8 (114.4) (11.8) ======== ======== ======= ======== Net assets 2006 2005 £ million £ million Class of business:Natural Resources 75.3 90.5Power and Process (14.6) 49.0Earth and Environmental 4.9 17.4Construction (290.6) (116.3)Investments 35.5 35.2 ------- -------- (189.5) 75.8Goodwill 187.9 435.2Interests in joint ventures and associates 85.2 85.0Net cash/(debt) 354.9 (245.5)Unallocated net assets 18.7 24.7Discontinued operations - (52.3)Assets and liabilities classified as held for sale 37.6 - ------- -------- 494.8 322.9 ======= ======== Geographical origin:United Kingdom (190.9) 23.2Rest of Europe (12.0) 1.3Americas 155.3 239.6Rest of the world 46.0 22.7 ------- -------- (1.6) 286.8Interests in joint ventures and associates 85.2 85.0Net cash/(debt) 354.9 (245.5)Unallocated net assets 18.7 24.7Discontinued operations - 171.9Assets and liabilities classified as held for sale 37.6 - ------- -------- 494.8 322.9 ======= ======== 3. PROFIT AND NET ASSETS RECONCILIATIONS RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX Year ended 31 December 2006 Pre-tax Tax on results results of Adjusted of joint joint profit ventures ventures Profit before Exceptional Intangible and and before tax items amortisation associates associates tax £ million £ million £ million £ million £ million £ million NaturalResources 55.0 (7.8) (1.8) (0.6) - 44.8Power andProcess 30.4 (17.6) (1.0) (1.2) - 10.6Earth andEnvironmental 15.2 - (0.5) - - 14.7Construction (27.8) (144.5) (0.3) (0.9) - (173.5)Investments 21.3 - - (12.1) - 9.2 ------- -------- -------- -------- -------- -------- 94.1 (169.9) (3.6) (14.8) - (94.2) Corporate costs (20.2) - - - - (20.2) ------- -------- -------- -------- -------- --------Profit/(loss)before netfinancing costs 73.9 (169.9) (3.6) (14.8) - (114.4) Net financingcosts (4.2) - - - - (4.2) Share ofpost-taxresults ofjoint ventures and associates - - - 14.8 (5.0) 9.8 ------- -------- -------- -------- -------- -------- 69.7 (169.9) (3.6) - (5.0) (108.8) ======= ======== ======== ======== ======== ======== Year ended 31 December 2005 Pre-tax Tax on results results of Adjusted of joint joint profit ventures ventures Profit before Exceptional Intangible and and before tax items amortisation associates associates tax £ million £ million £ million £ million £ million £ million NaturalResources 47.0 (7.0) (2.8) (0.2) - 37.0Power andProcess 36.7 (11.0) (1.4) (1.0) - 23.3Earth andEnvironmental 14.1 - (0.2) - - 13.9Construction 1.0 (69.1) (0.1) (6.4) - (74.6)Investments 16.6 - - (8.1) - 8.5 ------- -------- -------- -------- -------- -------- 115.4 (87.1) (4.5) (15.7) - 8.1 Corporate costs (19.9) - - - - (19.9) ------- -------- -------- -------- -------- -------- Profit/(loss)before netfinancing costs 95.5 (87.1) (4.5) (15.7) - (11.8) Net financingcosts (16.9) - - - - (16.9) Share ofpost-taxresults ofjoint ventures and associates - - - 15.7 (4.7) 11.0 ------- -------- -------- -------- -------- -------- 78.6 (87.1) (4.5) - (4.7) (17.7) ======= ======== ======== ======== ======== ======== 3. PROFIT AND NET ASSETS RECONCILIATIONS continued RECONCILIATION OF ADJUSTED NET ASSETS 31 December 2006 Interests Adjusted in joint net assets/ ventures and Intangible Net assets/ (liabilities) associates assets (liabilities) £ million £ million £ million £ million Natural Resources 72.6 0.6 2.1 75.3Power and Process (19.9) (1.0) 6.3 (14.6)Earth andEnvironmental 4.3 (0.2) 0.8 4.9Construction (283.4) (7.7) 0.5 (290.6)Investments 112.4 (76.9) - 35.5 -------- --------- -------- -------- (114.0) (85.2) 9.7 (189.5) Goodwill 187.9 - - 187.9 Intangible assets 9.7 - (9.7) - Interests in jointventures andassociates - 85.2 - 85.2 Net cash 354.9 - - 354.9 Unallocated netassets 18.7 - - 18.7 Assets andliabilitiesclassified as heldfor sale 37.6 - - 37.6 -------- --------- -------- -------- 494.8 - - 494.8 ======== ========= ======== ======== 31 December 2005 Interests in Adjusted joint net assets/ ventures and Intangible Net assets/ (liabilities) associates assets (liabilities) £ million £ million £ million £ million Natural Resources 86.2 0.3 4.0 90.5Power and Process 41.3 (0.5) 8.2 49.0Earth andEnvironmental 16.3 - 1.1 17.4Construction (114.4) (2.6) 0.7 (116.3)Investments 105.8 (70.6) - 35.2 -------- --------- -------- -------- 135.2 (73.4) 14.0 75.8 Goodwill 435.2 - - 435.2 Intangible assets 42.7 - (42.7) - Interests in jointventures andassociates - 85.0 - 85.0 Net debt (245.5) - - (245.5) Unallocated netassets 24.7 - - 24.7 Discontinuedoperations (69.4) (11.6) 28.7 (52.3) -------- --------- -------- -------- 322.9 - - 322.9 ======== ========= ======== ======== 4. EXCEPTIONAL ITEMS 2006 2005 £ million £ million Natural Resources (7.8) (7.0)Power and Process (17.6) (11.0)Construction (144.5) (69.1) -------- ---------Exceptional items of continuing operations (169.9) (87.1)Taxation on exceptional items of continuing operations 23.8 15.0Exceptional items of discontinued operations (posttax) 311.5 (2.4) -------- ---------Post-tax exceptional profits/(charges) 165.4 (74.5) ======== ========= Exceptional provisions were made in 2005 relating to AMEC's exit from lump sumfabrication work in the upstream (Natural Resources) and other markets (Powerand Process). In 2006 further provisions (£25 million) was made, reflectingsettlement of the major final accounts for upstream fabrication and the ongoingarbitration on a completed overseas Power and Process project. In 2005, exceptional provisions were also made for the costs of withdrawing fromcertain loss-making construction markets in the UK and US. In the first half of2006 AMEC made additional provisions for the completion of ongoing constructionprojects, litigation and other costs totalling £57 million (Construction). In the latter part of 2006 and following negative developments on several majordisputes AMEC made further provisions of £68 million, largely, in respect offuture settlement and litigation costs. These provisions reflect the view thatAMEC should seek to settle these disputes. Where settlement cannot be secured ona reasonable basis, AMEC will continue to defend its position. In addition, impairment and other provisions associated with a concrete segmentsbusiness of £15 million were made together with costs of £4 million associatedwith the potential separation of the Energy and Process activities from theBuilt Environment activities. 5. INCOME TAX Income tax on the profit from continuing operations before exceptional items andintangible amortisation for the year is based on an effective rate of 28.6%(2005: 26.0%). 6. PROFIT FOR THE YEAR FROM DISCONTINUED OPERATIONS AMEC SPIE, which was sold on 27 July 2006, and the pipeline constructionbusiness which are in the process of being sold have been classified asdiscontinued. The results of their operations were as follows: 2006 2005 £ million £ million Revenue 1,324.0 2,022.3Cost of sales and net operating expenses (1,300.1) (1,977.7) -------- --------- 23.9 44.6Intangible amortisation (2.6) (1.5) -------- ---------Profit before income tax 21.3 43.1Attributable tax (13.7) (18.6) -------- ---------Profit after income tax 7.6 24.5Exceptional items - (2.4)Profit on disposal 301.8 -Attributable tax on profit on disposal 9.7 - -------- ---------Profit for the year from discontinued operations 319.1 22.1 ======== ========= Profit before income tax:Discontinued operations 25.1 51.6Less: interest on intercompany debt capitalised atdisposal (3.8) (8.5) -------- ---------Profit before income tax reported above 21.3 43.1 ======== ========= 7. (LOSS)/EARNINGS PER SHARE Total basic (loss)/earnings per share is shown on the face of the incomestatement. The calculation of the average number of shares in issue has beenmade having deducted the shares held by the trustees of the Performance SharePlan 2002 and those held by the qualifying employee share ownership trust. 2006 Weighted average (Loss)/ (Loss)/ shares earnings per earnings number share £ million million pence Basic and diluted loss from continuingoperations (101.0) 325.9 (31.0) ======== ======== =========Basic and diluted earnings from discontinuedoperations 319.1 325.9 97.9 ======== ======== ========= 2005 Weighted average (Loss)/ (Loss)/ shares earnings per earnings number share £ million million pence Basic and diluted loss from continuingoperations (18.1) 323.3 (5.6) ======== ======== =========Basic and diluted earnings from discontinuedoperations 22.1 323.3 6.9 ======== ======== ========= Loss per share from continuing operations has been calculated on a loss of£101.0 million, as a result there are no dilutive ordinary shares. Basic and diluted losses from continuing operations are calculated as set outbelow: 2006 2005 £ million £ million Loss for the year from continuing operations (99.9) (18.4)(Profit)/loss attributable to minority interests (1.1) 0.3 -------- ---------Basic and diluted loss from continuing operations (101.0) (18.1) ======== ========= In order to appreciate the effects of exceptional items and intangibleamortisation on the reported performance, additional calculations of (loss)/earnings per share from continuing operations are presented. 2006 Weighted average (Loss)/ (Loss)/ shares earnings per earnings number share £ million million pence Basic loss from continuing operations (101.0) 325.9 (31.0) Exceptional items 146.1 - 44.8 Intangible amortisation 3.6 - 1.1 -------- -------- ---------Basic earnings before exceptional items andintangible amortisation 48.7 325.9 14.9 Share options - 4.1 (0.1) Employee share and incentive schemes - 6.1 (0.3) -------- -------- ---------Diluted earnings before exceptional items andintangible amortisation 48.7 336.1 14.5 ======== ======== ========= 7. (LOSS)/EARNINGS PER SHARE continued 2005 Weighted average (Loss)/ (Loss) shares earnings per earnings number share £ million million pence Basic loss from continuing operations (18.1) 323.3 (5.6) Exceptional items 72.1 - 22.3 Intangible amortisation 4.5 - 1.4 -------- -------- ---------Basic earnings before exceptional items andintangible amortisation 58.5 323.3 18.1 Share options - 4.0 (0.2) Employee share and incentive schemes - 6.8 (0.4) -------- -------- ---------Diluted earnings before exceptional items andintangible amortisation 58.5 334.1 17.5 ======== ======== ========= 8. DIVIDENDS Dividends paid during the year were as follows: 2006 2005 pence £ million pence £ million Interim dividend in respect of theyear ended 31 December 2005(2005: interim dividend inrespect of the year ended 31December 2004) 4.0 13.0 3.8 11.2 Final dividend in respect of theyear ended 31 December 2005(2005: final dividend inrespect of the year ended 31December 2004) 7.5 24.5 7.2 23.3 ------- -------- -------- -------- 11.5 37.5 11.0 34.5 ======= ======== ======== ======== Dividends proposed during the year were as follows: 2006 2005 pence penceInterim dividend in respect of the year ended 31December 2006 (2005: interim dividend in respect of the year ended 31 December 2005) 4.2 4.0 Final dividend in respect of the year ended 31December 2006 (2005: final dividend in respect of the year ended 31 December 2005) 8.0 7.5 -------- -------- 12.2 11.5 ======== ======== After the balance sheet date the directors proposed a final dividend in respectof the year ended 31 December 2006 of 8.0 pence per share payable on 2 July 2007to equity holders on the register at the close of business on 11 May 2007. Thisdividend has not been provided for and there are no income tax consequences forthe company. 9. RECONCILIATION OF MOVEMENTS IN EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THEPARENT 2006 2005 £ million £ million Total recognised income and expense attributable to equityholders of the company 211.3 (12.1)Items previously recognised in reserves transferred toprofit on disposal (3.1) -Dividends (38.3) (36.4)Shares issued 1.6 89.7Movements relating to share-based payments (0.1) (0.8) --------- ---------Net increase in total equity 171.4 40.4 Equity as at beginning of the year 322.6 282.2 --------- ---------Total equity attributable to equity holders of theparent as at end of the year 494.0 322.6 ========= ========= 10. ANALYSIS OF NET CASH/(DEBT) 2006 2005 £ million £ million Cash at bank and in hand 336.2 320.8Short-term investments 39.2 31.1 --------- ---------Cash and cash equivalents disclosed on the balancesheet 375.4 351.9Overdrafts (1.2) (19.2) --------- --------- 374.2 332.7Cash and cash equivalents (including overdrafts)classified as held for sale 32.2 - --------- --------- 406.4 332.7Current debt (12.4) (19.9)Non-current debt (6.9) (558.3) --------- ---------Net cash/(debt) as at end of the year 387.1 (245.5) ========= ========= Net cash/(debt) is analysed between the amount disclosed in the balance sheetand amounts classified as held for sale as follows: 2006 2005 £ million £ million Net cash/(debt) disclosed on the balance sheet 354.9 (245.5)Net cash classified as held for sale 32.2 - --------- ---------Total net cash/(debt) as at end of the year 387.1 (245.5) ========= ========= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AMFW.L