14th May 2008 07:00
Wednesday 14 May 2008
AMEC plc INTERIM MANAGEMENT STATEMENT
Chief Executive Samir Brikho said:
"AMEC has made an excellent start to 2008 and each of our core divisions is progressing well.
"Our end markets remain strong. Overall, the outlook for 2008 is slightly better than our previous expectations and we confidently expect to deliver the targeted six per cent margin.
"We have announced three strategically important acquisitions since March, each of which has enhanced our position by strengthening our capability and geographic presence."
AMEC, the international engineering and project management company, is holding its annual general meeting at 10.30am today in London, UK. At the meeting, Chief Executive Samir Brikho will update shareholders on the group's strategic progress and the outlook.
AMEC will make a further trading update before entering the closed period ahead of the company's interim results for the six months ending 30 June 2008. These will be announced on Thursday, 28 August 2008.
Forward looking statements
Any forward looking statements made in this document represent management's best judgement as to what may occur in the future. However, the group's actual results for the current and future fiscal periods and corporate developments will depend on a number of economic, competitive and other factors, some of which will be outside the control of the group. Such factors could cause the group's actual results for future periods to differ materially from those expressed in any forward looking statements made in this document.
Conference call and presentation
A telephone conference call for analysts and investors will be held at 8.30am today.
INTERIM MANAGEMENT STATEMENT
Year to date trading has been slightly better than the board's expectations at the time of AMEC's preliminary results on 11 March 2008.
AMEC's end markets in the energy, power and process industry sectors remain strong.
Trading in each of the group's three core divisions has continued to be strong since the announcement of AMEC's preliminary results in March 2008.
Outlook
The strong start to the year gives the board confidence that the group will make slightly better progress in 2008 than its expectations at the time of AMEC's preliminary results on 11 March 2008.
The board's current expectations for 2009 remain unchanged.
The group's Operational Excellence programme is proceeding as planned and will be a major contributor to AMEC achieving its target margin of 8 per cent in 2010.
Acquisitions
On 11 March 2008, AMEC announced that it expected to spend around £100 million on acquisitions during the first half of 2008. Since then, the group has announced three acquisitions with an aggregate cash consideration of £70 million. Approximately £45 million of this will be paid in the current year, with the balance to be paid in future years.
Natural Resources
In April 2008, the acquisition of the leading UK based project services company Rider Hunt International was an important step in AMEC's strategy of providing best in class consultancy services in programme and project management to customers in the energy, power and process industries.
The acquisition of Bower Damberger Rolseth Engineering Limited ('BDR') was announced on 6 May and is expected to complete later this month. Based in Calgary, Canada, BDR provides specialist technical engineering services to the fast growing 'in-situ' heavy oil, gas and oil production industries in the Canadian oil sands market. The combination of AMEC's leading position in the mineable oil sands segment and BDR's strong reputation in in-situ extraction will create a strong position in a market with good growth prospects.
Earth and Environmental
The acquisition of US based company Smith Williams Consultants Inc. in April 2008 was the latest in a series of acquisitions consistent with AMEC's strategy of geographic and capacity expansion in the Earth and Environmental division. AMEC expects to announce the acquisition, for up to £50 million, of a further environmental consultancy business before the end of June 2008.
Operational Excellence
The Operational Excellence programme is proceeding as planned, with the implementation of all 12 focus areas having commenced since the beginning of the year.
As previously disclosed, Operational Excellence is expected to incur costs of up to £10 million during 2008. Further costs are expected in 2009.
Segmental performance
Natural Resources
Natural Resources end markets remain buoyant.
In Oil and Gas Services, North Sea operations have had a good start to the year, with steady volumes and a continued move towards higher value-added activities. Operations in the Americas remain strong, whilst frontier regions continue to benefit both from new contract awards and contract renewals.
The Canadian oil sands market remains particularly buoyant, with all areas of AMEC's activities seeing continued strong performance.
As expected, the Minerals and Metals Mining businesses has had a strong start to the year, with ramping up of projects in South America and continued high levels of activity in Canada.
The year to date average number of employees* in Natural Resources stands at 10,650, up 10 per cent on the comparable figure at 31 December 2007.
The Natural Resources order book at the end of March was £1.32 billion, nine per cent higher than 31 December 2007 (£1.21 billion).
The division is expected to deliver an EBITA margin at the upper end of the 9-10 per cent targeted for 2008 and is on track to deliver the 10-11 per cent targeted in 2010.
Power and Process
Whilst the business continues to operate in a strong market environment, it is being more selective in new work taken on and revenue growth is not a priority for 2008.
The year to date average number of employees* in Power and Process stands at 7,280, up eight per cent on the comparable figure at 31 December 2007.
The Power and Process order book stood at £1.29 billion at 31 March 2008 (31 December 2007 £1.36 billion) and continues to benefit from the higher gross margin threshold introduced during 2007 of nine per cent on all new contracts. The STEP Change and Operational Excellence programmes are expected to result in improved performance during 2008 and beyond.
The North American business is well on track to achieve the divisional EBITA margin target of 5-6 per cent in 2008, with the UK businesses already having achieved that level of performance in 2007. Overall, the Power and Process division is expected to achieve its EBITA margin target of 5-6 per cent in 2008 and is on course to deliver the 6-7 per cent targeted for 2010.
* Full time equivalents, including agency staff
Earth and Environmental
Earth and Environmental end markets continue to be generally strong, with the division expected to make further progress in 2008.
Private sector consulting remains strong, being partly offset by weaker overseas federal spending by the US Government in the early months of the year.
The year to date average number of employees* in Earth and Environmental stands at 3,370, down six per cent on the comparable figure at 31 December 2007, with the decrease reflecting the normal seasonal pattern of business during the North American winter months.
The division is expected to achieve its EBITA margin target of 8-9 per cent in 2008 and is on course to deliver the 9-10 per cent targeted for 2010.
* Full time equivalents, including agency staff
Investments and other activities
This division currently comprises of two ongoing PPP activities in Korea and the UK and the Wind Developments business.
Continuing PPP activities have performed as expected. In the Wind Developments business, planning permission on the 650 MW Lewis wind farm was refused on environmental grounds. AMEC is reviewing the basis for this decision and considering the appropriate next steps.
Exceptional gain on business disposal
The divestment of a peripheral plant hire business in February generated a small pre-tax exceptional gain.
Settlement of legacy issues
AMEC continues to make good progress with its strategy of settlement of disputes where reasonable to do so.
Following further satisfactory legacy contract settlements, an additional £5 million pre-tax net exceptional release of provisions is expected in the first half of 2008.
Net cash
Average weekly net cash for 2008 is expected to be c.£600 million. This figure is after taking account of acquisitions with an aggregate cash cost of up to £120 million (up to £80 million outflow in 2008) made or expected to be announced in the first half of 2008, together with share buy backs announced in the year to date.
Net financing income
As previously disclosed, net financing income in 2008 will benefit from the expected increase in average net cash for the year. With average net cash in 2008 currently expected to be c.£165 million above the average for 2007, net interest income in 2008 should be well ahead of 2007.
Taxation
As previously disclosed, the underlying tax rate in 2008 is expected to be c.34 per cent. This would reduce to c.31 per cent if the group is able to make use of tax attributes brought forward which have not been reflected within the deferred tax asset.
Share buy backs
Since the beginning of the programme in 2007, 4.27 million shares have been bought in the market, to be held in treasury, for a total cost of around £25 million.
Further buybacks of up to £75 million will be made, on an opportunistic basis.
Board changes
On 17 March 2008, AMEC announced the resignation of Stuart Siddall, Finance Director. Stuart will step down from the board following the company's annual general meeting on 14 May 2008 and will leave at the end of May 2008.
The process to appoint his successor is underway and Grant Ling, currently Group Financial Controller, will act as Interim Finance Director until the process is completed.
Issued share capital
As at 9 May 2008, AMEC had a total of 330,954,846 ordinary shares with voting rights. In addition 6,968,800 shares were held in treasury.
Enquiries to:
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AMEC plc: |
+ 44 (0)20 7539 5800 |
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Samir Brikho, Chief Executive |
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Grant Ling, Interim Finance Director |
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Sue Scholes, Director of Communications |
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Neil Jamieson, Director of Investor Relations |
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Media: |
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Frank Stokes, Media Relations Manager |
Notes to Editors:
AMEC plc
AMEC is a focused supplier of high-value consultancy, engineering, and project management services to the world's energy, power and process industries. With annual revenues of over £2.3 billion, AMEC designs, delivers and maintains strategic and complex assets for its customers. AMEC's Natural Resources, Power and Process and Earth and Environmental businesses employ approximately 22,000 people* in more than 30 countries globally. AMEC shares are traded on the London Stock Exchange where the company is listed in the Oil Equipment and Services sector (LSE: AMEC.L). www.amec.com
Grant Ling joined AMEC 22 years ago as an internal auditor from Price Waterhouse. He has subsequently progressed through a number of senior finance roles in the company, including spending five years as CFO in North America and is currently Group Financial Controller. He has a BA in Accountancy and is a Scottish CA.
* Full time equivalents, including agency staff
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