Full year results 2014

Amec Foster Wheeler plc 2014 results

Chief Executive Samir Brikho said:

"I am pleased to report that we have delivered 2014 results in line with expectations. Looking ahead, I believe our low-risk, multi-market model combined with the additional benefits from our integration and cost savings programmes, is a strong platform from which to create long-term value for shareholders."

Summary:

· Benefits of low-risk, multi-market model evident

· Completed transformational acquisition in November

· Integration on track; savings target increased to $125m

· Weak commodity pricing continues

· Full year dividend +3%

2014 results:

Key performance measures1

1) Adjusted performance measures used by the Group are reconciled to the equivalent IFRS measures in the section entitled 'Performance measures'

Reported under IFRS

2) Includes the proposed final dividend for 2014 of 28.5p per ordinary share

Outlook statement:

For 2015, we expect to see a continuation of recent trends - with growth in Clean Energy, downstream and Middle Eastern Oil & Gas markets offsetting tougher conditions elsewhere. This mix of performance, together with the increased customer pricing pressure and cost saving plans, is expected to lead to a modest reduction in like-for-like trading margins.

On current market forecasts, the reversal of the currency headwinds we experienced in 2014 will add approximately £150 million to scope revenue.

Contacts:

Results presentation:

We will host a presentation on the results for analysts and investors at 8.30am today at the offices of Nomura International, One Angel Lane London EC4R 3AB. For those unable to attend, dial-in details: UK 0800 368 0649, international +44 20 3059 8125, participant password: 544565.

Analyst consensus estimates:

Regularly updated on our website at amecfw.com/investors/consensus_estimates.htm

Notes to editors:

Amec Foster Wheeler (www.amecfw.com) designs, delivers and maintains strategic and complex assets for its customers across the global energy and related sectors.

With pro-forma 2014 scope revenues of £5.5 billion and over 40,000 employees in more than 50 countries, the company operates across the whole of the oil and gas industry - from production through to refining, processing and distribution of derivative products - and in the mining, clean energy, power generation, pharma, environment and infrastructure markets.

Amec Foster Wheeler offers full life-cycle services to offshore and onshore oil and gas (conventional and unconventional, upstream, midstream and downstream) for greenfield, brownfield and asset support projects, plus leading refining technology.

Amec Foster Wheeler shares are publicly traded on the London Stock Exchange and its American Depositary Shares are traded on the New York Stock Exchange. Both trade under the ticker AMFW.

Amec Foster Wheeler pro forma results for 2014, 2013, 2012 (Unaudited)

Background

We acquired a 95.3% controlling interest in Foster Wheeler on 13 November 2014. The Group's reported results and cash flows for 2014 therefore incorporate Foster Wheeler's results only for the last seven weeks of 2014. For this short period, we continued to report the existing Foster Wheeler operating segments: E&C Services and Global Power Group.

With effect from 1 January 2015, the Group adopted new geographical operating segments within its E&C business: Americas; Northern Europe & CIS; and Asia, Middle East, Africa & Southern Europe. Foster Wheeler's E&C Services segment was merged into the new geographical structure. Foster Wheeler's Global Power Group continues to be reported as a separate operating segment. We will first report the Group's results under the new segment structure in the 2015 half-year results, which will include comparative segment information restated on a consistent basis.

In January 2015, we acquired the remaining 4.7% interest in Foster Wheeler AG.

In this section, we present the Group's revenue and trading results for 2014, 2013 and 2012 on a pro forma basis on the assumption that Foster Wheeler had been acquired on 1 January 2012. We also present the pro forma revenue and trading results of the Group's new operating segments for each of those years.

The pro forma information is provided for comparative purposes only and does not necessarily reflect what the revenue and trading results of the combined group would have been for the periods presented, nor is it necessarily indicative of the combined group's future revenue and trading results.

The unaudited pro forma information has been prepared based on information derived from the following:

· the audited consolidated financial statements of Amec Foster Wheeler plc (formerly AMEC plc) for each of the three years ended 31 December 2014 prepared in accordance with IFRS;

· the audited consolidated financial statements of Foster Wheeler for each of the two years ended 31 December 2013 and the unaudited consolidated financial information of Foster Wheeler for the period from 1 January 2014 to 12 November 2014, in each case prepared in accordance with US GAAP.

Adjustments have been made to restate Foster Wheeler's results in accordance with AMEC's accounting policies under IFRS and to convert them from US dollars into Sterling using the exchange rates that AMEC used to convert the results of its US subsidiaries from US dollars into Sterling for each of the periods presented. Foster Wheeler's results have not, however, been further adjusted to retrospectively apply the purchase accounting adjustments that were made by AMEC to Foster Wheeler's balance sheet at the acquisition date in accordance with IFRS.

Group summary - pro forma basis

1) Non-IFRS measure (see 'Performance measures')

Segmental review by new business units on pro forma basis

Americas

Americas is the largest business unit, with substantial positions in each of our four core markets: Oil and Gas, Mining, Clean Energy, and Environment and Infrastructure.

Americas has over 16,000 employees in over 150 offices; geographically this region covers northern Canada to southern Chile and from Vancouver Island to Newfoundland.

Our experts in Americas support our customers in consulting, through the EPC project lifecycle (including engineering, procurement, project management and construction), into operations & maintenance, and remediation and reinstatement. 

1) Non-IFRS measure (see 'Performance measures')

Key Oil & Gas projects currently underway include oil sands work for Imperial Oil, Syncrude, CNRL, Suncor and Shell among others, and the provision of consulting and project services in US shale gas. In downstream, we continue to work on a propane dehydrogenation project in Texas for Enterprise Products and projects for LyondellBassell and Dow. In Latin America we continue to build our relationship through project activity with PEMEX in Mexico and Ecopetrol in Colombia.

Mining activity in project delivery include a number of copper, gold and potash EPCM projects for Codelco, Newmont, Thompson Creek, PotashCorp and K+S Potash. In E&I we are working on site remediation programmes for Honeywell and Duke.

Contract wins announced in 2014 included:

Northern Europe & CIS

Our 12,000 people operating from more than 120 locations in 15 countries in Northern Europe & CIS focus on three of our markets, Oil & Gas, Clean Energy and Environment & Infrastructure. The combination of the capabilities from both AMEC and Foster Wheeler gives us opportunities to deliver more services for our customers in all these markets. The largest exposure is to Oil & Gas, with strong positions in the North Sea and Azerbaijan. We are also one of the largest service providers to the UK nuclear industry.

1) Non-IFRS measure (see 'Performance measures')

Key projects worked on during the year include a five-year call-off contract to provide brownfield engineering for Talisman, Clair Ridge project for BP, Cygnus project for GDF Suez, and multiple projects with BG and Conoco Phillips in the UK North Sea.

Beyond Oil & Gas projects, on-going Clean Energy projects include reactor services support work for EDF's nuclear power stations in the UK and ongoing clean-up work at the Sellafield site, as well as framework agreements with National Grid.

Contract wins announced in 2014 included:

Asia, Middle East, Africa & Southern Europe (AMEASE)

AMEASE is a diverse region with over 9,000 employees spread across more than 40 locations. We now have enhanced capabilities and significantly increased customer reach which positions us well for growth across all of our four markets - Oil & Gas, Environment & Infrastructure, Mining and Clean Energy.

1) Non-IFRS measure (see 'Performance measures')

Key upstream Oil & Gas projects include providing asset support for ConocoPhillips' Bayu-Udan gas facilities in the East Timor Sea, operational readiness services for Chevron's Wheatstone facility offshore Australia, and onshore turnaround and maintenance support to ENI's onshore gas treatment plant and offshore unmanned wellhead platform, also in Australia.

In the Middle East we are providing technical and project management services on the Upper Zakum project for Zadco, supporting KNPC's new oil refinery at Al Zour, and delivering the propylene oxide plant at Jubail for Sadara Chemical Company. Other downstream projects include the Son refinery in Vietnam, and work on the synthetic rubber plant for Lanxess Butyl in Singapore. In Mining we continue to work on the Husab Uranium project in Namibia.

Contract wins announced in 2014 included:

Global Power Group (GPG)

GPG has market-leading capabilities in the design, supply and erection of circulating fluidised bed (CFB) boilers, auxiliary steam and air pollution control equipment including a wide range of aftermarket products and services. Customers include utilities, independent power producers, and industrial concerns.

1) Non-IFRS measure (see 'Performance measures')

Key project activity includes the erection of the 4 x 550MWe Samcheok ultra-supercritical CFB boilers, the largest CFB units in the world. Commercial operation is slated for early 2016. Significant proposal activity is ongoing for CFB projects predominantly in Asia and Eastern Europe.

Contract wins announced in 2014 included:

In addition, BHI Co, a licensee of the Group's technology, has won contracts to design and supply heat recovery steam generators in the US, Saudi Arabia, Thailand and South Korea during the year.

Board changes

There have been a number of changes to the board over the past twelve months. Tim Faithfull retired as a non-executive director after the AGM in May 2014. Following completion of the acquisition of Foster Wheeler, Stephanie Newby and Kent Masters joined the board as non-executive directors.

Earlier this month, we announced that Neil Carson will assume the roles of senior independent director and chairman of the remuneration committee, following Simon Thompson's decision not to seek re-election at the AGM in May 2015, when he will have served six years on the board.

Operating and financial review

Basis of preparation

Accounting policies

The Group's consolidated financial statements for the year ended 31 December 2014 have been prepared in accordance with IFRS as adopted for use in the EU and those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. From the Group's perspective, there are no differences between IFRS as adopted for use in the EU and IFRS as issued by the IASB.

The Group's principal accounting policies during 2014 were unchanged compared with 2013.

Adjusted performance measures

We report adjusted performance measures because they provide both management and investors with useful additional information about the underlying trading performance of the business.

Before we acquired Foster Wheeler, the adjusted performance measures that we reported excluded the amortisation of intangible assets and exceptional items and, where relevant, the tax effects of those items.

On the acquisition of Foster Wheeler, we assumed significant additional asbestos-related obligations in relation to claims for damages made or expected to be made by individuals who allege that they have suffered personal injury from exposure to asbestos primarily in connection with equipment allegedly manufactured by Foster Wheeler's subsidiaries during the 1970s or earlier. When Foster Wheeler's obligations are added to AMEC's existing, though much less significant, asbestos-related obligations, there is the possibility in the future that the Group's results and cash flows will be materially affected by changes in the asbestos-related obligations, or our provisions for these obligations. We have therefore additionally excluded from the non-IFRS performance measures the asbestos-related costs and interest expense (net of insurance recoveries) and, where relevant, the tax effect of those items. In previous years, asbestos-related costs incurred by AMEC were not material to the Group's trading performance and therefore there has been no restatement of the adjusted performance measures presented for 2013 and 2012.

Adjusted performance measures used by the Group are reconciled to the equivalent IFRS measures in the section entitled 'Performance measures'.

Continuing operations

Revenue

Revenue for the year was broadly unchanged compared with last year at £3,993 million (2013: £3,974 million).

Revenue declined by £175 million in the Americas and by £108 million Europe, but increased by £54 million in the Growth Regions. Revenue from Oil & Gas was down 13%, Mining was down 14% and E&I down 3%, but revenue from Clean Energy was up 11%. Revenue in all markets was adversely affected by the strength of sterling, particularly against the US dollar. Overall, currency exchange rate movements reduced revenue by £238 million in 2014 compared with 2013.

Foster Wheeler contributed £274 million to the Group's revenue during the last seven weeks of the year following its acquisition in November 2014.

Flow-through procurement decreased by £47 million to £73 million (2013: £120 million).

Excluding flow-through procurement, the effect of acquisitions and currency movements, underlying revenue increasedby 1%. Underlying revenue from Oil & Gas was down 5% and that from Mining down 6%, but Clean Energy was up 16% and E&I was up 5%.

Administrative expenses

Administrative expenses were £354 million (2013: £293 million), including exceptional items, intangibles amortisation and asbestos-related costs (net of insurance recoveries) totalling £135 million (2013: £65 million).

Administrative expenses before intangibles amortisation, exceptional items and net asbestos-related costs declined by 4% to £219 million (2013: £228 million), principally due to the impact of currency movements and reduced share-based payment charges. Also determined on this basis, Foster Wheeler's administrative expenses following its acquisition were £26 million.

Corporate costs, which comprise the costs of operating central corporate functions and certain regional overheads, were£4 million lower at £31 million (2013: £35 million).

Profit before net financing expense

Profit before net financing expense was significantly lower at £148 million (2013: £243 million), largely due to exceptional costs incurred during 2014 in relation to the acquisition of Foster Wheeler.

Amortisation and impairment of intangible assets

Intangible assets principally comprise goodwill and identifiable intangible assets that were recognised in relation to acquired businesses. Goodwill is not amortised but is subject to an annual impairment test. No impairment was recognised in either 2014 or 2013.

Intangibles amortisation was £49 million (2013: £47 million). Whilst an additional amortisation expense of £11 million was recognised on the intangible assets acquired with Foster Wheeler and there was the full-year amortisation of intangible assets recognised in acquisitions completed in 2013, the year-on-year change was reduced because the amortisation expense in 2013 included the accelerated amortisation of certain intangible assets. We expect the full-year impact of the amortisation of intangible assets acquired with Foster Wheeler to be approximately £85 million.

Asbestos-related costs (net of insurance recoveries)

During 2014, the Group recognised net asbestos-related costs of £8 million (2013: £nil) in profit before net financing expense, which largely related to the reduction between the acquisition date and the year-end date in the discount rate applied to the net asbestos-related liabilities assumed on the acquisition of Foster Wheeler. In addition, the Group recognised an asbestos-related interest expense of £1 million (2013: £nil).

Exceptional items

Net exceptional costs totalling £98 million (2013: £25 million) were recognised in arriving at profit before tax from continuing operations, as follows:

· costs of £41 million in relation to the acquisition of Foster Wheeler (including transaction costs of £37 million within administrative expenses and acquisition-related facility fees amortisation of £4 million within net financing expense);

· costs of £35 million relating to the integration of Foster Wheeler and AMEC (including internal staff costs associated with identifying and achieving cost synergies);

· costs of £6 million incurred in completing the restructuring of AMEC's business onto a geographical basis;

· a net loss of £16 million on the exit of businesses, comprising a loss of £21 million on businesses sold in the year (principally the reverse premium payable on exit from the Group's investment in the Lancashire Waste project), which was partially offset by a gain of £5 million on the release of a provision no longer required in respect of a business closed in a previous year.

Trading profit and trading margin

1 Non-IFRS measure (see 'Performance measures')

Trading profit decreased by 6% to £321 million (2013: £343 million). Trading margin decreased by 70 basis points to 8.2% (2013: 8.9%).

In Americas, trading profit fell due to the impact of currency translation and lower levels of activity in Oil & Gas and Mining, being partially offset by increased work in Clean Energy. Trading margin declined partially due to this change in market mix towards lower margin Clean Energy and because of the timing of large contract close-outs, which were particularly favourable in 2013. In Europe, trading profit and trading margin both increased compared with last year, largely as a result of the non-recurrence of the losses from the Teesside Gas Processing Plant contract. In the Growth Regions, trading profit fell due to the impact of currency translation and a lower contribution from Clean Energy and E&I. Compared to last year, Growth Regions trading margin fell due to pricing pressure from customers and investment for growth.

Currency exchange rate movements reduced trading profit by £22 million in 2014 compared with 2013.

Net financing expense

Net financing expense was £5 million (2013: £2 million), including bank interest payable of £7 million (2013: £2 million), net foreign exchange losses of £nil (2013: £1 million), and net interest income on pension assets and liabilities of £2 million (2013: £1 million). In 2014, net financing expense also included a net expense of £1 million (2013: £nil) due to the unwinding of the discount on asbestos-related liabilities (net of insurance recoveries).

A net currency exchange loss of £4 million (2013: loss of £1 million) was recognised in the translation reserve in respect of foreign currency borrowings and derivatives held in designated net investment hedging relationships.

Share of results of joint ventures

The Group's share of joint ventures' profit for the year was £12 million (2013: £14 million).

Profit before tax

Profit before tax was £155 million (2013: £255 million) after intangibles amortisation of £49 million (2013: £47 million), net asbestos-related costs and interest expense of £9 million (2013: £nil million), exceptional items of £98 million(2013: £25 million) and the Group's share of joint ventures' tax expense of £6 million (2013: £5 million).

Adjusted profit before tax was 5% lower at £317 million (2013: £332 million).

Taxation

Our tax policy is to manage our obligations in compliance with all relevant tax laws, disclosure requirements and regulations. We seek to ensure that our approach to tax and the tax payments that we make in all territories in which we have operations are fully consistent with local requirements, taking into account available tax incentives and allowances and are aligned with the Group's wider business strategy. We seek to develop good, open working relationships with tax authorities and to engage with them proactively, recognising that tax legislation can be complex and may be subject to differing interpretations.

During 2014, there was a tax credit on exceptional items of £6 million (2013: tax charge of £6 million), and a tax credit of £12 million on intangibles amortisation (2013: £20 million). In addition, there was an exceptional tax charge of £16 million in 2013.

The Group's share of joint ventures' income tax expense was £6 million (2013: £5 million).

The Group's effective tax rate on continuing operations (including its share of joint ventures' income tax expense but before exceptional items, intangibles amortisation and asbestos-related items) increased to 23.0% (2013: 21.9%). The increase principally reflected reduced prior period credits which result from agreement of historical items with various tax authorities. In addition, 2013 included a credit following a reduction in the tax rate applied to the UK pension surplus which was not repeated in 2014.

Profit for the year from continuing operations

Profit for the year from continuing operations was £106 million (2013: £186 million) after intangibles amortisation of£49 million (2013: £47 million), the net asbestos-related expense of £9 million (2013: £nil), net exceptional items of£98 million (2013: £25 million), an income tax credit on those items of £18 million (2013: charge of £2 million).

Adjusted profit for the year from continuing operations was 6% lower at £244 million (2013: £260 million).

Non-controlling interests

During 2014, there was a loss of £3 million attributable to non-controlling interests (2013: loss of £1 million).

Earnings per share

Diluted EPS was 26.5p (2013: 59.8p), comprising earnings per share of 35.1p (2013: 62.5p) from continuing operations and a loss of 8.6p (2013: 2.7p) from discontinued operations.

Adjusted diluted EPS from continuing operations was 79.5p (2013: 87.2p), due to the decline in the profit for the year from continuing operations and the increase in the number of shares in issue as a consequence of the acquisition of Foster Wheeler.

Dividend

The Board recommends a final dividend of 28.5p per share, which, together with the interim dividend of 14.8p per share, results in a total dividend of 43.3p per share (2013: 42.0p), an increase of 3%. Subject to approval by shareholders at the AGM on 14 May 2015, the final dividend will be payable on 2 July 2015 to shareholders on the register at the close of business on 29 May 2015.

Dividend cover for 2014 is 1.8 times (2013: 2.1 times) based on adjusted diluted EPS from continuing operations. Going forward, the Board expects to maintain a progressive dividend policy whilst maintaining dividend cover at around two times adjusted diluted EPS from continuing operations.

Results by operating segment

Americas

1 Non-IFRS measure (see 'Performance measures')

Revenue in Americas was £2,072 million (2013: £2,247 million), a decline of 8%. Excluding flow-through procurement, the effect of acquisitions and currency movements, underlying revenue was up 4%. Growth in underlying revenue in Clean Energy and E&I was partially offset by declines in the Oil & Gas and Mining.

Trading profit fell by 14% to £207 million (2013: £241 million), largely as a result of the reduced levels of activities inOil & Gas and Mining. Trading margin was 10.2%, down by 110 basis points compared with 2013. Trading margin declined principally due to increased weighting of lower-margin Clean Energy in the product mix and due to the timing of large contract close-outs, which were particularly favourable in 2013.

Europe

1 Non-IFRS measure (see 'Performance measures')

Revenue in Europe fell by 9% to £1,119 million (2013: £1,227 million), primarily due to the reduced level of Oil & Gas activity in the North Sea. Underlying revenue declined by 8%.

Trading profit increased by 9% to £101 million (2013: £93 million). Trading margin was 9.1%, up 150 basis points compared with 2013, largely as a result of the non-recurrence of losses from the Teesside Gas Processing Plant.

Growth Regions

1 Non-IFRS measure (see 'Performance measures') 

Revenue in Growth Regions improved by 10% to £590 million (2013: £536 million), primarily driven by increased revenue from Oil & Gas activities in the Middle East and a partial recovery in Mining revenue in Australia. Underlying revenue increased by 18%, principally due to the exclusion of adverse currency exchange rate movements.

Trading profit fell by 9% to £30 million (2013: £33 million), reflecting lower contributions from Clean Energy and E&I. Trading margin was 5.1%, down 110 basis points compared with 2013, due to pricing pressure from customers and investment for growth.

E&C Services and Global Power Group

E&C Services and Global Power Group are Foster Wheeler business units and therefore contributed to the Group's performance only for the final seven weeks of the year following the acquisition of Foster Wheeler in November 2014.

E&C Services contributed revenue of £221 million and a trading profit of £4 million (before intangibles amortisation of £7 million). As at 31 December 2014, the value of E&C Services' order book was £2.0 billion.

Global Power Group contributed revenue of £53 million and a trading profit of £2 million (before intangibles amortisation of £4 million). As at 31 December 2014, the value of Global Power Group's order book was £0.4 billion.

Investment Services

During the periods under review, Investment Services principally comprised the Incheon Bridge PPP project in Korea and the Lancashire Waste project (which the Group exited in 2014), the Group's insurance captive, the Group's wind development activities and a range of other non-core activities.

Revenue in Investment Services was £6 million (2013: £6 million). Investment Services incurred a loss before net financing expense of £16 million (2013: £3 million), after deducting an exceptional loss on disposals of businesses of £21 million (2013: £nil). Trading profit was £8 million (2012: £11 million), of which £3 million (2013: £7 million) was derived from joint ventures.

Discontinued operations

Discontinued operations represent the residual assets and retained obligations of businesses sold in prior years, togetherwith the UK conventional power business that was classified as a discontinued operation during 2013.

Discontinued operations generated a trading loss before tax of £10 million (2013: loss of £10 million) and after a tax credit of £2 million (2013: £2 million) generated a loss for the year of £8 million (2013: loss of £8 million). During 2014, negative revenue of £13 million was recognised due to the settlement of final accounts and additional provisions on certain contracts within the UK conventional power business.

Discontinued operations included a loss on disposals of £23 million (2013: loss £6 million) arising from additional indemnity provisions and costs associated with businesses sold in prior years. In 2014, the loss on disposals included a provision of £11 million in respect of a new claim received in the year related to a contract completed by the Built Environment business which was sold in 2007.

Discontinued operations generated an overall loss for the year of £27 million (2012: £8 million).  

Acquisitions

Acquisition of Foster Wheeler

On 13 November 2014, the Group acquired a 95.3% interest in Foster Wheeler AG by way of a public tender offer. Consideration payable for the interest acquired totalled £1,915 million, of which £979 million was settled in cash,£919 million was settled by the issue of approximately 85 million of the Company's ordinary shares and £17 million was settled by the grant of replacement share options and awards.

Management's preliminary assessment shows that the net identifiable assets of Foster Wheeler amounted to£362 million at the acquisition date. As at 31 December 2014, provisional goodwill of £1,583 million was recognised on the acquisition of Foster Wheeler. Acquisition costs relating to Foster Wheeler totalling £37 million were recognised within administrative expenses during 2014.

In January 2015, the Group acquired the remaining 4.7% interest in Foster Wheeler AG by way of a 'squeeze-out merger' under Swiss law for consideration of £85 million, of which £51 million was paid in cash and £34 million was settled by the issue of 4.3 million of the Company's ordinary shares and ADSs.

Further details of the acquisition of Foster Wheeler are set out in note 13 to the accompanying financial information.

Acquisition of Scopus

On 15 December 2014, the Group acquired the entire issued share capital of Scopus Group (Holdings) Limited for£68 million in cash (of which payment of £1 million is deferred until the first anniversary of the acquisition).

Management's preliminary assessment shows that the net identifiable assets of Scopus amounted to £34 million at the acquisition date. As at 31 December 2014, provisional goodwill of £34 million was recognised on the acquisition of Scopus.

Cash flow

Trading cash flow

Trading cash flow was lower at £283 million (2013: £ 341 million), principally due to the reduction in trading profit and an increase in working capital of £31 million.

Cash conversion fell back to 88% (2013: 99%).

Cash generated from operations

Cash generated from operations was £200 million (2013: £292 million), a decrease of £92 million which was largely due to the £58 million decline in trading cash flow and the increase of £37 million in the cash outflow on exceptional items (principally acquisition-related costs).

Capital expenditure

Capital expenditure was £31 million (2013: £23 million). Additionally, in 2014, purchases of computer software amounting to £33 million were financed using deferred payment arrangements.

Acquisitions and disposals

Cash consideration paid on the acquisition of business was £1,049 million, which comprised £982 million for Foster Wheeler (including a currency hedging loss of £3 million) and £67 million for Scopus.

During 2014, the net cash outflow on acquisitions was £781 million (2013: £21 million), after deducting cash and cash equivalents of £268 million (2013: £nil) held by the acquired businesses. After taking into account debt owed by the acquired businesses, the effect of acquisitions was to increase the Group's net debt by £876 million (2013: £31 million).

During 2014, there was a cash outflow of £23 million (2013: outflow of £4 million) in relation to businesses sold, which principally related to the reverse premium paid to exit Lancashire Waste.

Movement in net (debt)/cash

The movement in net (debt)/cash may be analysed as follows:

Net (debt)/ cash comprised:

Balance sheet

Goodwill and other intangibles

As at 31 December 2014, the carrying amount of goodwill was £2,390 million (2013: £757 million), with the increase during the year principally due to the addition of the goodwill recognised on the acquisition of Foster Wheeler (£1,583 million) and Scopus (£34 million).

As at 31 December 2014, the carrying amount of other intangibles was £929 million (2013: £150 million), which comprised acquired identifiable intangible assets of £851 million (2013: £113 million) and computer software of £78 million(2013: £37 million). We recognised identifiable intangible assets amounting to £738 million on the acquisition of Foster Wheeler and £31 million on the acquisition of Scopus, which principally comprised customer relationships, brands and trademarks and their respective order backlogs. Whilst additions to other intangible assets were significant, the amortisation expense increased only slightly to £49 million (2013: £47 million) because both Foster Wheeler and Scopus were acquired late in 2014.

Property, plant and equipment

As at 31 December 2014, property, plant and equipment amounted to £157 million (2013: £39 million), with the increase during the year largely due to property amounting to £84 million and plant and equipment amounting to £34 million acquired with Foster Wheeler and Scopus.

We hold the majority of the properties through which the Group operates under operating leases which are for varying periods and on differing terms. The Group has a network of over 350 offices worldwide, which range from regional hubs, with a headcount of between 1,000 and 2,500 employees, to smaller offices with more local focus. It is expected that the number of properties that are occupied by the Group will be reduced following the integration of Foster Wheeler's businesses.

Due to the geographical spread of the Group's operations, there is no individual facility the loss of which would have a material adverse impact on the Group's operations. Equally, there are no plans to construct, expand or improve facilities that would, on completion or cancellation, significantly affect the Group's operations.

Post-retirement benefits

The Group has a number of defined benefit pension plans in a number of countries. Following the acquisition of Foster Wheeler, there are three principal plans: two in the UK and one in the US. Each of these plans is closed to new entrants and the two Foster Wheeler plans are also closed to future service accruals. As at 31 December 2014, the net deficit on the Group's defined benefit pension plans amounted to £86 million (2013: net surplus of £40 million). During 2014, the Group contributed £32 million (2013: £29 million) to defined benefit pension plans and expects to contribute £33 million in 2015, including special contributions of £6 million.

Further information on the Group's retirement benefit plans is provided in note 11 to the accompanying financial information.

Asbestos-related obligations

Both AMEC and Foster Wheeler are subject to claims by individuals who allege that they have suffered personal injury from exposure to asbestos primarily in connection with equipment allegedly manufactured by certain of their subsidiaries during the 1970s or earlier.

As at 31 December 2014, the Group recognised:

· an asbestos-related provision of £407 million (after the effect of discounting of £76 million), which included estimates of indemnity amounts and defence costs for open and yet to be asserted claims expected to be incurred in each year in the period to 2050; and

· insurance recoveries of £107 million (after discounting of £4 million).

Management expects that there will be a net cash outflow of £20 million during 2015 due to the excess of forecast indemnity payments and defence costs over insurance proceeds.

Other provisions

Other provisions held at 31 December 2014 amounted to £696 million (2013: £163 million), with the substantial increase during the year arising principally due to the recognition of obligations assumed on the acquisition of Foster Wheeler. Otherwise, additional provisions of £20 million were recognised in relation to businesses sold in prior years and additional provisions of £5 million were recognised in relation to the Group's insurance captive. Unutilised provisions amounting to £10 million were released during 2014.

Other provisions may be summarised as follows:

Details of the provisions held by the Group are set out in note 10 to the accompanying financial information.

Non-controlling interests

As at 31 December 2014, non-controlling interests in equity amounted to £29 million (2013: £2 million), with the increase during the year being principally due to the addition of the 4.7% non-controlling interest in Foster Wheeler AG that existed when the Group took control of Foster Wheeler in November 2014 and was subsequently acquired by the Group inJanuary 2015.

Going concern

Based on internal forecasts and projections that take into account reasonably possible changes in the Group's trading performance, the directors consider that the Company and the Group have adequate financial resources to continue in operation for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the Company's and the Group's financial statements.

Performance measures

Scope revenue

Scope revenue represents reported revenue less flow-through procurement revenue.

Flow-through procurement revenue is recognised when we purchase materials, equipment or third-party services for our customers on a reimbursable basis. We do not recognise any profit on flow-through procurement costs. Scope revenue therefore represents the revenue that we have earned from providing services to our customers.

Profitability measures

We use three measures of profitability that are not recognised measures under IFRS: trading profit, trading margin and adjusted profit before tax.

As appropriate, we exclude the following specific items in arriving at these measures: exceptional items; the amortisation of intangible assets; and asbestos-related costs (net of insurance recoveries). Exceptional items are items of income and expense that are material by their size, incidence or nature and may include, but are not restricted to: acquisition-related costs; restructuring costs; gains and losses on the disposal of fixed assets; and gains and losses on the disposal or closure of businesses. Acquisition-related costs may include transaction costs (including external advisory, legal, valuation and other professional fees and attributable internal costs), the amortisation of acquisition-related facility fees, payments to selling shareholders that are accounted for as remuneration and changes in the fair value of contingent consideration.

Trading profit

Trading profit represents profit before net financing expense excluding exceptional items; the amortisation of intangible assets; and asbestos-related costs (net of insurance recoveries). Trading profit includes the Group's share of the trading profit of joint ventures.

Trading margin

Trading margin represents trading profit expressed as a percentage of scope revenue.

Adjusted profit before tax

Adjusted profit before tax represents profit before tax before exceptional items, the amortisation of intangible assets, asbestos-related costs and interest expense (net of insurance recoveries), and the Group's share of tax on the results of joint ventures.

Cash flow measures

Trading cash flow

Trading cash flow represents cash generated from operations before cash flows arising from exceptional items, asbestos-related payments (net of insurance recoveries), the difference between retirement benefits contributions and the current service cost, legacy settlements and discontinued operations, and currency translation differences on working capital, but including dividends received from joint ventures.

Cash conversion

Cash conversion represents trading cash flow expressed as a percentage of trading profit.

Other measures

Underlying change in revenue

We define the underlying change as the year-on-year change excluding the effect of exchange rate fluctuations on the translation into sterling of the results of foreign operations, flow-through procurement activities and acquisitions and disposals of businesses.

Adjusted diluted EPS

Adjusted diluted earnings per share represents profit for the year from continuing operations before exceptional items, the amortisation of intangible assets, asbestos-related costs and interest expense (net of insurance recoveries), and the tax effect of those items, divided by the diluted number of ordinary shares.

Reconciliations of adjusted diluted EPS to diluted EPS from continuing operations for each period presented are included in note 7 to the consolidated financial information.

Dividend cover

Dividend cover represents adjusted diluted EPS from continuing operations as a multiple of the dividend per ordinary share.

1Includes the proposed final dividend for 2014 of 28.5p per ordinary share.

Order book

Our order book represents the total remaining value of secured projects to be executed up to any break point in the relevant contracts. Contracts are included in our order book only when they are signed and we do not include contracts won by joint ventures.

CONDENSED CONSOLIDATED INCOME STATEMENT

Year ended 31 December