31st Aug 2006 07:00
AMEC PLC30 August 2006 31 August 2006 AMEC plc Interim Results 2006 PRE-TAX PROFIT* UP 21% TO £24 MILLION NEW CEO TO FINALISE STRATEGIC REVIEW BY YEAR-END Highlights* • Strong performance in all businesses with the exception of UK Building and Civil Engineering, where action is being taken to improve performance • Pre-tax profit* £24.2m up 21% (2005: £20.0m) • Pre-tax loss after previously announced exceptional items £(57.9)m (2005: pre-tax profit £18.7m) • Total post-tax loss after discontinued operations (AMEC SPIE) of £(41.3)m (2005: profit £22.4m) • Interim dividend increased by 5.0% to 4.2p per share • Successful disposal of AMEC SPIE results in second half exceptional gain of about £295m after tax and moves the group to average net cash of £140m - £150m • New chief executive, Samir Brikho, to finalise ongoing strategic review by the end of 2006 Commenting today, chairman Jock Green-Armytage said: "Securing Samir Brikho as chief executive demonstrates that AMEC's prospects arestrong enough to attract the best talent. His knowledge of our core energy andprocess markets and strong track record in achieving and managing change makehim an excellent choice to lead AMEC at this exciting and challenging time. "Samir joins us as we are finalising our strategy of restructuring AMEC forgrowth. It is important he has time to take control of the process and willfinalise the strategic review by year-end." Chief executive Sir Peter Mason KBE said: "Since November 2005, we have completed the first phases of reshaping AMEC. Wehave successfully sold AMEC SPIE, generating an exceptional gain of about £295mafter tax, and have separated the remaining AMEC into two discrete divisions. "I am pleased to report that the three divisions within our Energy and Processbusiness have had an even stronger than expected first half with overall profits40 per cent ahead. Within the Built Environment division our Investmentsbusiness has also done well, but this progress has been overshadowed bydisappointing performance in Construction. However, we are tackling this andbelieve we have put the business firmly on the road to recovery." * AMEC SPIE, which was sold on 27 July 2006, is treated as a discontinuedoperation. Unless otherwise stated, amounts and percentage movements throughoutthis document relating to the income statement are stated before profit fromdiscontinued operations, intangible amortisation and pre-tax exceptional items. Financial highlights* Six months ended 30 June 2006 2005 £m £mContinuing operations: Revenue 1,675.4 1,397.0 +20% Profit before intangible amortisation, 24.2 20.0 +21%exceptional items and income tax (Loss)/profit after intangible amortisation, (57.9) 18.7exceptional items and before income tax Discontinued operations: Revenue 973.2 820.4 +19% Profit after intangible amortisation, 8.4 7.1 +18%exceptional items and after income tax Average weekly net debt including AMEC SPIE 400 420** Diluted earnings per share from continuing 5.4p 5.1poperations Diluted (loss)/earnings per share after (12.6)p 6.8pintangible amortisation and exceptionalitems Interim dividend per share 4.2p 4.0p +5% * Unless otherwise stated, amounts and percentage movements throughout thisdocument relating to the income statement are for continuing operations and arestated before intangible amortisation of £2.8m (2005: £1.3m) and pre-taxexceptional items of £79.3m (2005: £nil)** 12 months ended 31 December 2005 Basis of segmentation Following the sale of AMEC SPIE, AMEC now comprises two divisions, Energy andProcess and Built Environment, each with their own operational structures andmanagement teams. As a result, AMEC is adopting a revised statutory segmentalanalysis reflecting this structure. The segments are: Energy and Process: • Natural Resources • Power and Process • Earth and Environmental Built Environment: • Construction • Investments Results are also disclosed on the former segmental basis, together withreconciliations, in the supplementary slides contained in the interim resultspresentation. Discontinued activities AMEC SPIE was sold on 27 July 2006. In accordance with IFRS 5*, AMEC SPIE is nowtreated as a discontinued operation and the income statement for 2005 has beenrestated. The table below analyses the results for the six months to 30 June2006 between continuing and discontinued operations. Six months ended 30 June 2006 Six months ended 30 June 2005 Cont-inuing Discon-tinued Rail Total Cont-inuing Discon-tinued Rail Total operations operations JV group operations operations JV group tax tax Pre-tax 24.2 19.6 0.2 44.0 20.0 15.1 0.2 35.3profit** Income tax (6.2) (9.3) (0.2) (15.7) (3.4) (7.5) (0.2) (11.1) Post-tax 18.0 10.3 - 28.3 16.6 7.6 - 24.2profit** Intangible (2.8) (1.9) - (4.7) (1.3) (0.5) - (1.8)amortisation Exceptional (64.9) - - (64.9) - - - -items*** (Loss)/ (49.7) 8.4 - (41.3) 15.3 7.1 0.0 22.4Profit forthe period * International Financial Reporting Standard 5: Non-current assets held for saleand discontinued operations** Before intangible amortisation and exceptional items *** Post-tax Forward looking statements 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. The preliminary results slide presentation and speaking remarks will beavailable on AMEC's web site www.amec.com from approximately 8:30 am on 31August 2006. Enquiries to:AMEC plc: + 44 (0)20 7634 0000 Analysts and investors:Sir Peter Mason KBE, Chief ExecutiveStuart Siddall, Finance DirectorNeil Jamieson, Director of Investor Relations Media:Juliet Sychrava, Director of CorporateCommunicationsCharles Reynolds, Head of Media Relations OVERVIEWFirst half performance in the Energy and Process and Investments businesses wasstronger than anticipated, but within Construction, UK Building and CivilEngineering was poor. Steps have been taken to arrest this and improvement isexpected. The successful disposal of AMEC SPIE generated a second half exceptional gain ofabout £295m after tax and has strengthened the balance sheet. On 25 August 2006, AMEC announced the appointment of Samir Brikho as successorto Sir Peter Mason, who will step down as chief executive on 30 September 2006and retire from AMEC on 31 October 2006, having reached normal retirement age. The board is nearing completion of its strategic review, the final stages ofwhich will be completed under the leadership of Samir Brikho by the year-end. Results OF OPERATIONS - CONTINUING OPERATIONSRevenue for the period increased by 20% to £1,675.4m, (2005: £1,397.0m) mainlyas a result of strong growth in the Natural Resources, Power and Process andEarth and Environmental businesses. Pre-tax profit before intangible amortisation and exceptional items for theperiod was £24.2m, an increase of 21% on the previous year (2005: £20.0m). Thisincrease reflected the timing of a PPP asset disposal which occurred in thefirst half of 2006, rather than the second half as had been anticipated. Performance in UK Building and Civil Engineering was unsatisfactory andreflected poor performance on a number of current contracts and also overheadunder-recoveries. There was a pre-tax exceptional charge of £79.3m, as detailed below, andintangible amortisation of £2.8m, resulting in a pre-tax loss of £(57.9)m (2005:pre-tax profit of £18.7m). Diluted earnings per share for the period from continuing operations increasedby 6% to 5.4p (2005: 5.1p). The dividend for the period is increased by 5% to 4.2p per share (2005: 4.0p). Results OF OPERATIONS - DISCONTINUED OPERATIONSResults of operations exclude AMEC SPIE, which was sold on 27 July 2006 and istreated as a discontinued operation. AMEC SPIE generated a post-tax profit of£10.3m in the six months ended 30 June 2006, in line with expectations. Theinterim results exclude the post-tax exceptional gain of about £295m on the saleof AMEC SPIE, which will be accounted for in the second half of 2006. OUTLOOK - CONTINUING ACTIVITIES 2006Natural Resources, Power and Process and Earth and Environmental are performingmore strongly than anticipated. Investments is expected to perform in line withour original expectations, assuming recovery of costs incurred on the ColchesterGeneral Hospital PFI scheme. Good progress in these businesses is expected to beoffset by losses in UK Building and Civil Engineering, where steps have beentaken to improve performance. The sale of AMEC SPIE in July generated an exceptional gain of about £295m aftertax and has strengthened the balance sheet. Following the sale, we expectaverage net cash for the period 1 August 2006 to 31 December 2006 to be £140m -£150m. 2007AMEC expects to make good progress in 2007, with recovery in UK Building andCivil Engineering and continued growth in the Energy and Process businesses.This strong performance is expected to be tempered by reduced activity in Iraqand profits from the sale of PPP investments that are planned to be lower thanin 2006. STRATEGIC DEVELOPMENTS Sale of AMEC SPIEOn 22 May 2006, AMEC announced that it had entered into an agreement with PAIpartners for the sale of AMEC SPIE for a cash consideration of approximately€1bn (£685m). The disposal was approved by AMEC shareholders at an ExtraordinaryGeneral Meeting held on 6 July 2006 and was completed on 27 July 2006,generating an exceptional gain of about £295m after tax. Strategic reviewFollowing the successful sale of AMEC SPIE, the board is nearing completion ofits strategic review. The final stages of the review will be completed under theleadership of Samir Brikho. As part of this process, the board will continue toreview capital structures, taking into account the capital needs of thecontinuing businesses. Should the board conclude that there is surplus capitalin the group, it will consider a return of cash to shareholders. The review is expected to be finalised by the year-end. BOARD CHANGESOn 25 August 2006, AMEC announced that Samir Brikho, a member of the ABB GroupExecutive Committee, will succeed Sir Peter Mason as chief executive of AMEC plcon 1 October 2006. Sir Peter Mason, who has headed the group for 10 years, will step down as chiefexecutive on 30 September 2006 and will retire from the company on 31 October2006, having reached normal retirement age. Jean Monville, chairman of AMEC SPIE and an executive director of AMEC plc,resigned from the board on 27 July 2006, to concentrate on running AMEC SPIEunder its new owners. Non-executive director Jean-Paul Jacamon has resigned from the board with effectfrom today and is succeeded as chairman of the audit committee of the board bynon-executive director Peter Byrom. James Dallas has stepped down as chairman of the remuneration committee aftersome years in that role and is succeeded by non-executive director TimFaithfull. Segmental reviewAmounts and percentage movements relating to segmental activities are statedbefore corporate costs of £10.4m (2005: £9.5m), intangible amortisation of £2.8m(2005: £1.3m) and pre-tax exceptional items of £79.3m (2005: £nil). Net assets represent the operating net assets of each business including anallocation of certain central assets/(liabilities) but, for the avoidance ofdoubt, exclude intangible assets and net debt. The segmentation has been revised since our 23 May 2006 announcement, to reflectthe recently implemented management structure of the continuing businesses. As aconsequence, UK Industrial is now reflected in the Power and Process segment andOil Sands Infrastructure is now part of Natural Resources. Segmental SummaryFirst half performance in the Energy and Process businesses (Natural Resources,Power and Process and Earth and Environmental) was stronger than anticipated,with pre-tax profit up 40% to £47.9m. Pre-tax losses for the period in the Built Environment businesses (Constructionand Investments) were £(3.3)m. Results reflected a stronger first half thanexpected in the Investments business, offset by poor performance in the UKBuilding and Civil Engineering division of the Construction business. Commentary for each of AMEC's principal segments of activity is set out below. Natural Resources£ million 2006 2005 changeRevenue 452.1 402.6 +12%Profit before net financing 26.0 18.3 +42%costsMargin 5.8% 4.5% +1.3ptsNet assets 121.9 86.2* +41%Order book £1.05bn £0.98bn* +7%* As at 31 December 2005 Natural Resources comprises AMEC's activities in oil and gas, oil sands andmetals and mineral mining.Revenue for the period increased by 12% to £452.1m, including £66.5m (2005:£119.1m) in respect of lump-sum fabrication activity now being completed on acost-reimbursable basis on which we are not reporting any margin. Afteradjusting for this activity, revenue increased by 36% to £385.6m (2005:£283.5m). Profit increased by 42% to £26.0m (2005: £18.3m) with a margin of 6.7% for theperiod after adjusting for lump-sum fabrication activity. Results reflect better than expected sales in Canada, good growth in emergingmarkets and high levels of activity in the North Sea in asset support servicesand platform upgrades. Net assets of £121.9m (31 December 2005: £86.2m) reflect the increase in activity and a short-term increase on contracts in the UK North Sea and West Africa. Net assets include about £40m in respect of older fabrication projects and are expected to decline over the next six to nine months. The Natural Resources order book was up 7% on the position at the end of 2005,standing at £1.05bn. Contract awards in the first half included a three-yearcontract with BG Group plc ('BG') to provide asset support services to all ofBG's UK upstream assets and to manage the development of the Maria brownfieldgas project in the North Sea, together with a three-year extension to our oiland gas asset support services contract from Shell Philippines Exploration forthe Malampaya gas field. Power and Process£ million 2006 2005 changeRevenue 474.7 335.5 +41%Profit before net financing 15.6 13.3 +17%costsMargin 3.3% 4.0% -0.7ptsNet assets 39.5 87.5* -55%Order book £1.52bn £1.17bn* +30%* As at 31 December 2005 Power and Process includes AMEC's activities in UK gas and electricity markets,AMEC Nuclear and its engineering services in North American industrial and powermarkets. Our joint venture activities in Iraq are also reported in this segment. Revenue for the period increased by 41% to £474.7m (2005: £335.5m) reflectingstrength in the UK power utilities market, strong growth in North Americanprocess industries and the acquisition of the nuclear engineering servicesbusiness NNC, which took place in July 2005. Profit for the period was up 17% to £15.6m (2005: £13.3m). Margin of 3.3%reflected the low margin recognition associated with the early stages of somerecently commenced projects and reduced volume of higher margin activity inIraq. In the UK, activity levels remained high in the gas and electricity markets,where we are working on new facilities including gas storage and distribution,flue gas desulphurisation systems and refurbishment or replacement of gas mainsand overhead power transmission lines. Net assets declined to £39.5m (31 December 2005: £87.5m) reflecting settlement of a final account on a pipeline project, good cash performance in North America (including joint venture activity in Iraq) and provisions made in June 2006. The Power and Process order book grew strongly in the first half, increasing by30% to £1.52bn, reflecting strength in power and process markets on both sidesof the Atlantic. Awards in the first half included contracts won in jointventure to fit flue-gas desulphurisation systems in the Kilroot power station inNorthern Ireland and the Longannet power station in Scotland, together withcontracts in the US for LNG and power generation facilities. Earth and Environmental£ million 2006 2005 changeRevenue 141.5 108.3 +31%Profit before net financing 6.3 2.7 +133%costsMargin 4.5% 2.5% +2.0ptsNet assets 25.0 16.3* +53%* As at 31 December 2005 AMEC Earth and Environmental provides specialist environmental, geotechnical,program management and consultancy services to a broad range of clients in thepublic and private sectors. Revenue increased for the period by 31% to £141.5m (2005: £108.3m), reflectingcontinuing strength in US Federal spending together with the energy and miningsectors in North America. Profit more than doubled to £6.3m (2005: £2.7m) withmargin up to 4.5% (2005: 2.5%). In addition to market strength, milder weatherin Canada allowed works to proceed earlier in the year than usual, providinguplift in revenues and margin. Construction£ million 2006 2005 changeRevenue 577.6 540.3 +7%Losses before net financing (20.1) (12.5) -61%costsMargin (3.5)% (2.3)% -1.2ptsNet liabilities (156.9) (114.4)* -37%Order book £1.53bn £1.48bn* +3%* As at 31 December 2005 Construction comprises AMEC's activities in Building and Facilities Services,Building and Civil Engineering and UK Rail (in joint venture with SPIE). Revenue for the period increased by 7% to £577.6m (2005: £540.3m), largelyreflecting increased activity on contracts including London Heathrow Airport'sTerminal 5, together with work performed on AMEC's PPP project portfolio. We areexiting, as planned, certain markets in the UK and US, and sales in lump-sumBuilding and Civil Engineering are expected to decline. The Building and Facilities Services business continued to perform well in thefirst half. Losses within UK Building and Civil Engineering of £23m were £9mgreater than in the year ended December 2005, reflecting poor performance on anumber of current contracts and overhead under-recoveries. Steps have been taken to improve performance in UK Building and CivilEngineering. We have put new management in place, become more selective in thework we perform, strengthened our commercial procedures and end life forecastingprocesses and increased audit. In addition, action is being taken to reduce thecost base of the business consistent with the reduced level of continuingoperations. In January 2006 our Design and Project Management and Building andCivil Engineering businesses were merged, with two out of seven UK regionaloffices being closed and a further two being downsized. Annualised cost savingsof some £7m are targetted to result from these actions.We are well advanced in exiting our North American construction activities andonly one contract remains in progress today. Net liabilities of £156.9m (31 December 2005: £114.4m) reflect the exceptionalprovisions made in June 2006 partially offset by the reduction in advance cashwithin Construction. The Construction order book at 30 June 2006 was up 3% at £1.53bn, reflecting ourplanned exit from certain markets and the changed focus of the business. Investments£ million 2006 2005 changeRevenue 49.4 23.2 +113%Profit before net financing 16.8 19.0 -12%costs*Net assets 142.8 105.8** +35%* Including pre-tax profit of joint ventures** As at 31 December 2005 Investments comprises AMEC's PPP, Property Development and Wind Energybusinesses. The Investments business had a stronger first half than expected, due tocompletion of a PPP asset disposal in the first half of 2006, rather than thesecond half as had been anticipated. Results compare with a strong first halflast year when a PPP asset was sold and two PPP projects achieved financialclose. On 29 June 2006, financial close was reached on the South Lanarkshire Schools project in which AMEC has a 33% equity stake. An AMEC joint venture has been notified that it is to be appointed preferred bidder on the East Dunbartonshire Schools project. AMEC is short listed for a hospital project in Fife, as well as the Knowsley Building Schools for the Future project and St Luke's Hospital in Middlesbrough. On 14 June 2006, Essex Rivers NHS Trust unexpectedly announced the cancellationof the Colchester General Hospital PFI scheme where AMEC, in joint venture, waspreferred bidder. The project had been expected to reach financial close during2006. The recovery of costs incurred by AMEC, £7m of which have been capitalisedin the two years since being appointed preferred bidder, is being discussed withboth the Trust and the NHS centrally. It is expected that, in accordance withthe Bates Report, these costs will be reimbursed. In Wind Energy, we are hopeful of positive determinations on the Clashindarroch,North-East Scotland public inquiry that took place in May 2006 and Edinbane, onthe Isle of Skye. PPP portfolio valuationThe valuation of the PPP portfolio undertaken at 31st December 2005 has beenupdated for additions and disposals during the first six months of 2006.Theupdated valuation of £108.0m (31 December 2005: £109.5m) is based on a weightedaverage discount rate of 10.6%. No value is ascribed in the valuation to thoseprojects where AMEC is either preferred bidder or is shortlisted. The valuation is sensitive to discount rates, which have been improving. Forillustrative purposes, a discount rate of 8.6% would value the portfolio at£148m. TaxThe tax rate for the continuing businesses for the year was 25.6%. Afteradjusting for joint ventures, the underlying tax rate was 31.2% (2005: 25.9%).We continue to benefit from the utilisation of US tax losses, albeit at areduced level in 2006, and expect that our underlying tax rate will remain justbelow 30% for the foreseeable future. Net debt/cash Average weekly net debt including AMEC SPIE for the first half of 2006 was £400m(12 months ended 31 December 2005: £420m), in line with our March 2006 forecast. The net cash outflow before financing activities of £162.6m falls to about £74mafter excluding AMEC SPIE, which was sold on 27 July 2006 and is now treated asa discontinued operation. At 30 June 2006, the group's net debt* was £464m (31 December 2005: £385m). Theincrease reflected a reduction in advance payments of £46m in the continuingbusiness and normal trading trends. Following the sale of AMEC SPIE, we expectaverage net cash for the period 1 August 2006 to 31 December 2006 to be £140m -£150m. For the period 1 January 1996 to 30 June 2006, our profit to cash deficit wasabout £20m as compared with a deficit of £61m for the period 1 January 1996 to31 December 2005, as reported at the time of our preliminary results in March2006. If the analysis is adjusted for some of the exceptional provisions made inJune 2006 for prospective costs, the deficit would be about £60m, which largelyrelates to capital employed on Oil and Gas fabrication contracts.* Excludes AMEC SPIE net cash 30 June 2006 £36m (31 December 2005 £125m). Net financing costs Net financing costs were £8.1m (2005: £10.1m). Net interest payable was broadlyin line with last year but there were foreign exchange translation losses and anIAS 39 charge of £0.5m in the first half of 2005 which have not recurred thisyear. Intangible amortisation and exceptional itemsIntangible amortisation increased in the period to £2.8m (2005: £1.3m). Theincreased charge principally reflects the acquisition of the nuclear engineeringservices business NNC in the second half of 2005. On 16 June 2006, AMEC announced pre-tax exceptional charges of £79.3m (2005:£nil) as explained in note 3. These costs and provisions related to AMEC'swithdrawal from certain construction markets in the UK and US, oil and gasupstream lump-sum fabrication and other activities, and provision for futurelegal and other costs of disputes. We believe that we have taken an appropriateposition on all contracts where there are outstanding disputes. CONSOLIDATED INCOME STATEMENT Six months ended 30 June 2006 Before exceptional items and intangible Exceptional Intangible amortisation items amortisation Note £ million £ million £ million £ million Continuing operations Revenue 2 1,675.4 - - 1,675.4 Cost of sales (1,520.4) (35.4) - (1,555.8) Gross profit/(loss) 155.0 (35.4) - 119.6 Administrative expenses (127.1) - (2.8) (129.9) Loss on business disposals - (43.9) - (43.9)and closures Profit/(loss) before net 27.9 (79.3) (2.8) (54.2)financing costs Financial income 5.8 - - 5.8 Financial expense (13.9) - - (13.9) Net financing costs (8.1) - - (8.1) Share of post-tax resultsof joint venturesand associates 4.4 - - 4.4 Profit/(loss) before 2 24.2 (79.3) (2.8) (57.9)income tax Income tax 4 (6.2) 14.4 - 8.2 Profit/(loss) for theperiod fromcontinuing operations 18.0 (64.9) (2.8) (49.7) Profit/(loss) for theperiod fromdiscontinued operations 5 10.3 - (1.9) 8.4 Profit/(loss) for the 28.3 (64.9) (4.7) (41.3)period Attributable to: Equity holders of the (41.1)company Minority interests (0.2) (41.3)Basic earnings/(loss) per 6share: Continuing operations (15.2)p Discontinued operations 2.6 p (12.6)p Diluted earnings/(loss) 6per share: Continuing operations (15.2)p Discontinued operations 2.6 p (12.6)p CONSOLIDATED INCOME STATEMENT Six months ended 30 June 2005 Before exceptional items and intangible Exceptional Intangible amortisation items amortisation Note £ million £ million £ million £ million Continuing operations Revenue 2 1,397.0 - - 1,397.0 Cost of sales (1,258.3) - - (1,258.3) Gross profit 138.7 - - 138.7 Administrative expenses (110.5) - (1.3) (111.8) Loss on business disposals - - - -and closures Profit/(loss) before net 28.2 - (1.3) 26.9financing costs Financial income 4.3 - - 4.3 Financial expense (14.4) - - (14.4) Net financing costs (10.1) - - (10.1) Share of post-tax resultsof joint venturesand associates 1.9 - - 1.9 Profit/(loss) before 2 20.0 - (1.3) 18.7income tax Income tax 4 (3.4) - - (3.4) Profit/(loss) for theperiod fromcontinuing operations 16.6 - (1.3) 15.3 Profit/(loss) for theperiod fromdiscontinued operations 5 7.6 - (0.5) 7.1 Profit/(loss) for the 24.2 - (1.8) 22.4period Attributable to: Equity holders of the 22.6company Minority interests (0.2) 22.4 Basic earnings per share: 6 Continuing operations 4.8p Discontinued operations 2.2p 7.0p Diluted earnings per 6share: Continuing operations 4.7p Discontinued operations 2.1p 6.8p CONSOLIDATED INCOME STATEMENT Year ended 31 December 2005 Before exceptional items and intangible Exceptional Intangible amortisation items amortisation Note £ million £ million £ million £ million Continuing operations Revenue 2 3,110.9 - - 3,110.9 Cost of sales (2,799.4) (26.2) - (2,825.6) Gross profit/(loss) 311.5 (26.2) - 285.3 Administrative expenses (230.0) - (4.5) (234.5) Loss on business disposals - (60.9) - (60.9)and closures Profit/(loss) before net 81.5 (87.1) (4.5) (10.1)financing costs Financial income 12.0 - - 12.0 Financial expense (28.6) - - (28.6) Net financing costs (16.6) - - (16.6) Share of post-tax resultsof joint venturesand associates 10.7 - - 10.7 Profit/(loss) before 2 75.6 (87.1) (4.5) (16.0)income tax Income tax 4 (16.1) 15.0 - (1.1) Profit/(loss) for theperiod fromcontinuing operations 59.5 (72.1) (4.5) (17.1) Profit/(loss) for theperiod fromdiscontinued operations 5 24.7 (2.4) (1.5) 20.8 Profit/(loss) for the 84.2 (74.5) (6.0) 3.7period Attributable to: Equity holders of the 4.0company Minority interests (0.3) 3.7 Basic earnings/(loss) per 6share: Continuing operations (5.2)p Discontinued operations 6.5 p 1.3 p Diluted earnings/(loss) 6per share: Continuing operations (5.2)p Discontinued operations 6.5 p 1.3 p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Exchange differences ontranslation offoreign subsidiaries (14.8) 2.7 44.4 Actuarial losses on definedbenefit pensionschemes - - (56.7) Net gain/(loss) on hedges of netinvestmentin foreign subsidiaries 4.2 (1.3) (12.0) Cash flow hedges: Effective portion of changes in 5.7 (6.3) (3.8)fair value Transferred to the income - 0.5 (1.0)statement Group share of changes in fairvalue of cash flowhedges within joint venture 6.0 (2.2) (8.0)entities (net of tax) Tax in respect of items recogniseddirectly inequity (2.0) 1.8 18.3 Net expense recognised directly in (0.9) (4.8) (18.8)equity (Loss)/profit for the period (41.3) 22.4 3.7 Total recognised income and expense for (42.2) 17.6 (15.1)the period Attributable to: Equity holders of the company (43.3) 17.8 (12.1) Minority interests 1.1 (0.2) (3.0) Total recognised income and expense for (42.2) 17.6 (15.1)the period CONSOLIDATED BALANCE SHEET Note 30 June 2006 30 June 2005 31 December 2005 £ million £ million £ million ASSETS Non-current assets Property, plant and equipment 90.0 149.1 158.3 Intangible assets 215.5 408.5 477.9 Interests in joint ventures and 87.2 64.5 85.0associatesOther investments 1.4 6.7 4.5 Other receivables - 24.7 24.0 Retirement benefit assets 82.0 123.2 74.7 Deferred tax assets 66.7 61.5 70.9 Total non-current assets 542.8 838.2 895.3 Current assets Inventories 66.1 96.6 73.8 Trade and other receivables 942.9 1,598.5 1,884.2 Derivative financial instruments 1.3 3.0 0.8 Cash and cash equivalents 256.0 299.3 351.9 Tax receivable 3.4 - - Assets classified as held for 1,335.7 - -sale Total current assets 2,605.4 1,997.4 2,310.7 Total assets 3,148.2 2,835.6 3,206.0 LIABILITIES Current liabilities Bank loans and overdrafts (32.3) (57.1) (39.1) Trade and other payables (970.3) (1,569.0) (2,007.7) Derivative financial instruments (7.3) (16.6) (3.3) Tax payable - (28.7) (56.1) Liabilities classified as held (1,037.9) - -for sale Total current liabilities (2,047.8) (1,671.4) (2,106.2) Non-current liabilities Bank loans (688.1) (586.6) (558.3) Trade and other payables (32.0) (69.7) (73.7) Derivative financial instruments - (4.4) (13.0) Retirement benefit liabilities (9.9) (50.1) (56.2) Deferred tax (85.3) (56.9) (47.1) Provisions (27.8) (29.1) (28.6) Total non-current liabilities (843.1) (796.8) (776.9) Total liabilities (2,890.9) (2,468.2) (2,883.1) Net assets 2 257.3 367.4 322.9 EQUITY Share capital 166.7 166.4 166.4 Share premium account 90.1 89.4 89.5 Hedging and translation reserves (8.9) (34.3) (5.8) Capital redemption reserve 17.2 17.2 17.2 Retained earnings (10.1) 126.0 55.3 Amounts recognised directly inequity relating toassets and liabilities 0.9 - -classified as held for sale Total equity attributable to equityholdersof the parent 255.9 364.7 322.6 Minority interests 1.4 2.7 0.3 Total equity 257.3 367.4 322.9 CONSOLIDATED CASH FLOW STATEMENT Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £ million £ million £ million Cash flow from operating activities (Loss)/profit before income tax from (57.9) 18.7 (16.0)continuing operations Profit before income tax from 5 17.7 14.6 39.0discontinued operations (Loss)/profit before income tax (40.2) 33.3 23.0 Financial income (12.8) (9.4) (22.3) Financial expense 25.8 22.1 44.1 Share of post-tax results of joint (4.9) (1.9) (8.1)ventures and associates Intangible amortisation 4.7 1.8 6.0 Depreciation 21.4 17.3 38.4 Profit on disposal of property, plant (1.6) (2.4) (9.5)and equipment Equity settled share-based payments 0.1 (1.4) (0.8) (7.5) 59.4 70.8 (Increase)/decrease in inventories (6.1) (8.4) 21.9 Decrease/(increase) in trade and other 51.1 234.6 (30.5)receivables (Decrease)/increase in trade and otherpayables and provisions (154.9) (368.6) 70.6 Cash (absorbed)/generated from (117.4) (83.0) 132.8operations Interest paid (25.1) (20.1) (43.7) Tax (paid)/received (2.6) (12.3) 3.9 Net cash flow from operating activities (145.1) (115.4) 93.0 Cash flow from investing activities Acquisition of subsidiaries, net of (14.9) (24.4) (57.8)cash acquired Acquisition of joint ventures and (16.0) (3.7) (25.0)associates Purchase of property, plant and (24.3) (22.1) (55.4)equipment Purchase of intangible assets (2.2) (4.6) (9.3) Disposal of joint ventures and 5.3 7.3 10.0associates Disposal of property, plant and 21.0 8.3 16.9equipment Interest received 11.8 9.2 23.2 Dividends received from joint ventures 1.8 2.4 3.5and associates Net cash flow from investing activities (17.5) (27.6) (93.9) Net cash flow before financing activities (162.6) (143.0) (0.9) Cash flow from financing activities Proceeds from shares issued 0.9 89.5 89.7 Proceeds from new loans 160.9 71.5 5.8 Dividends paid (13.0) (11.2) (34.5) Net cash flow from financing activities 148.8 149.8 61.0 (Decrease)/increase in cash and cash (13.8) 6.8 60.1equivalents Cash and cash equivalents as at thebeginning of the period 332.7 270.0 270.0 Exchange (losses)/gains on cash and (3.8) (4.6) 2.6cash equivalents Cash in businesses now equity accounted (9.3) - - Cash and cash equivalents as at the end 305.8 272.2 332.7of the period Cash and cash equivalents consist of: Cash at bank and in hand 232.0 202.4 320.8 Short-term investments 24.0 96.9 31.1 256.0 299.3 351.9 Overdrafts (19.2) (27.1) (19.2) 9 236.8 272.2 332.7 Cash and cash equivalents classed as 69.0 - -held for sale Cash and cash equivalents 305.8 272.2 332.7 NOTES 1. PREPARATION OF INTERIM RESULTS This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the company'spublished consolidated accounts for the year ended 31 December 2005. In determining the appropriate accounting policy for AMEC's PPP activities, thedirectors have considered the current status of the draft IFRIC Interpretationson service concession arrangements. The draft interpretations were issued in2005 and IFRIC is currently reviewing the responses it has received. However,the final form of the interpretations and the timetable for their finalisationby IFRIC and adoption by the EU remains uncertain. In view of this uncertainty,adopted IFRS contains no accounting requirements that specifically apply toservice concession arrangements and the directors consider that it remainsappropriate to apply the approach set out in Application Note F of the UKFinancial Reporting Standard 5 "Reporting the substance of transactions" indetermining the accounting model to be applied to AMEC's PPP activities. Oncethe accounting model has been determined, the assets and liabilities of theservice concession arrangement are accounted for in accordance with adoptedIFRS. This accounting policy does not differ significantly from that appliedunder UK GAAP. The comparative figures for the year ended 31 December 2005 are not thestatutory accounts for that financial year. Those accounts have been reported onby the auditors and delivered to the registrar of companies. The report of theauditors was unqualified and did not contain statements under section 237(2) or(3) of the Companies Act 1985. 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE EXCEPTIONAL CHARGES, INTANGIBLEAMORTISATION AND INCOME TAX AND NET ASSETS OF CONTINUING OPERATIONS Revenue Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Class of business:Natural Resources 452.1 402.6 870.6Power and Process 474.7 335.5 870.0 Earth and Environmental 141.5 108.3 270.9 Energy and Process 1,068.3 846.4 2,011.5 Construction 577.6 540.3 1,063.7Investments 49.4 23.2 56.2 Built Environment 627.0 563.5 1,119.9 1,695.3 1,409.9 3,131.4Internal revenue (19.9) (12.9) (20.5) 1,675.4 1,397.0 3,110.9 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE EXCEPTIONAL CHARGES, INTANGIBLEAMORTISATION AND INCOME TAX AND NET ASSETS OF CONTINUING OPERATIONS (continued) Revenue Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Geographical origin:United Kingdom 941.3 773.6 1,611.5Rest of Europe 83.4 74.6 229.3 Americas 495.1 328.8 944.5Rest of the world 155.6 220.0 325.6 1,675.4 1,397.0 3,110.9 Profit/(loss)* Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Class of business:Natural Resources 26.0 18.3 47.0Power and Process 15.6 13.3 38.1 Earth and Environmental 6.3 2.7 14.1 Energy and Process 47.9 34.3 99.2 Construction (20.1) (12.5) 1.0Investments 16.8 19.0 16.6 Built Environment (3.3) 6.5 17.6 44.6 40.8 116.8Corporate costs (10.4) (9.5) (19.9) 34.2 31.3 96.9 Net financing costs (8.1) (10.1) (16.6) Share of tax of joint ventures and (1.9) (1.2) (4.7)associates Profit/(loss)* 24.2 20.0 75.6 Geographical origin:United Kingdom 8.5 19.1 51.7Rest of Europe 3.8 (0.8) 7.5 Americas 26.1 8.3 44.2Rest of the world 6.2 14.2 13.4 44.6 40.8 116.8Corporate costs (10.4) (9.5) (19.9) 34.2 31.3 96.9 Net financing costs (8.1) (10.1) (16.6) Share of tax of joint ventures and (1.9) (1.2) (4.7)associates Profit/(loss)* 24.2 20.0 75.6 *before exceptional charges, intangible amortisation and income tax 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE EXCEPTIONAL CHARGES, INTANGIBLEAMORTISATION AND INCOME TAX AND NET ASSETS OF CONTINUING OPERATIONS(continued) Net assets 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Class of business:Natural Resources 121.9 99.7 86.2Power and Process 39.5 118.8 87.5 Earth and Environmental 25.0 40.4 16.3 Energy and Process 186.4 258.9 190.0 Construction (156.9) (32.5) (114.4)Investments 142.8 99.1 105.8 Built Environment (14.1) 66.6 (8.6) 172.3 325.5 181.4 SPIE - (80.0) (115.6) 172.3 245.5 65.8 Intangible assets 215.5 408.5 477.9Net debt (464.4) (344.4) (245.5)Unallocated net assets 36.1 57.8 24.7 (40.5) 367.4 322.9Assets and liabilities classified as held 297.8 - -for sale Net assets 257.3 367.4 322.9 Geographical origin: United Kingdom 40.0 148.3 47.8 Rest of Europe (9.6) 22.0 27.4 Americas 38.4 107.4 70.3 Rest of World 103.5 47.8 35.9 172.3 325.5 181.4 SPIE - (80.0) (115.6) 172.3 245.5 65.8Intangible assets 215.5 408.5 477.9Net debt (464.4) (344.4) (245.5)Unallocated net assets 36.1 57.8 24.7 (40.5) 367.4 322.9Assets and liabilities classified as held 297.8 - -for sale Net assets 257.3 367.4 322.9 3. EXCEPTIONAL ITEMS 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Natural Resources - - 4.9 Power and Process 9.2 - 7.7 Construction 55.7 - 59.5 Exceptional items of continuing operations 64.9 - 72.1 Exceptional items of discontinued - - 2.4operations 64.9 - 74.5 Power and Process and Natural ResourcesProvision was made in 2005 relating to AMEC's exit from lump-sum fabricationwork in the upstream (Natural Resources) and other markets (Power and Process).In 2006, further provision has been made relating mainly to one major lump sumproject where no progress has been made in settlement of final accounts. ConstructionIn May 2004, the exit from US construction management activities was announced.Subsequently, in November 2005 AMEC announced its exit in the UK from roadbuilding on a lump sum basis and certain building/refurbishment activities.Provision was made for the costs of exiting these activities in 2005. Finalisation of remaining contracts has been more difficult than expected andtherefore a further provision of £24 million is made in respect of projects nowlargely completed. The group's exit from certain construction activities in the UK and US hasinvolved contract disputes, which have in some cases become increasinglyprolonged and costly. Provision is now made to cover increasing costs oflitigation amounting to £22 million, particularly in the US. In addition, the group was involved in disputes in respect of two constructionprojects completed some years ago where it had been believed that insurancepolicies would respond in the event of claims being proven against AMEC. Thereis now some concern that the insurance policies may not respond in full and,therefore, a provision of £10 million has now been made. 4. INCOME TAX Income tax on the profit/(loss) before exceptional items and intangibleamortisation for the six months ended 30 June 2006 is based on an effective rateof 31.2 per cent, which has been calculated by reference to the projected chargefor the full year. 5. PROFIT FOR THE PERIOD FROM DISCONTINUED OPERATIONS The sale of AMEC SPIE completed on 27 July 2006 and its results have beenclassified as discontinued. The results of its operations were as follows: 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Revenue 973.2 820.4 1,755.2Cost of sales and net operating expenses (953.6) (805.3) (1,712.3) 19.6 15.1 42.9Exceptional items - - (2.4)Intangible amortisation (1.9) (0.5) (1.5) Profit before income tax 17.7 14.6 39.0Attributable tax (9.3) (7.5) (18.2) Profit for the period from discontinued 8.4 7.1 20.8operations Profit before tax:SPIE 22.1 19.0 47.5Less: interest on intercompany debt (4.4) (4.4) (8.5)capitalised at disposal Profit before tax reported above 17.7 14.6 39.0 6. EARNINGS PER SHARE Total basic earnings/(loss) 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 Long-Term IncentivePlan and the Performance Share Plan 2002 and those held by the qualifyingemployee share ownership trust. In order to appreciate the effects of thecontinuing and discontinued operations and exceptional items on the reportedperformance, additional calculations of earnings per share are presented. Six months ended 30 June 2006 Weighted average shares Earnings per Earnings number share £ million million pence Basic and diluted earnings from continuing (49.5) 325.4 (15.2)operations Basic and diluted earnings from 8.4 325.4 2.6discontinued operations Earnings per share from continuing operations has been calculated on a loss of£49.5 million, as a result there are no dilutive ordinary shares. Basic earnings from continuing operations (49.5) 325.4 (15.2) Exceptional items 64.9 - 19.9 Intangible amortisation 2.8 - 0.9 Basic earnings before intangibleamortisationand exceptional items 18.2 325.4 5.6 Share options - 4.8 (0.1) Employee share and incentive schemes - 6.8 (0.1) Diluted earnings before intangibleamortisation and exceptional items 18.2 337.0 5.4 6. EARNINGS PER SHARE (continued) Six months ended 30 June 2005 Weighted average shares Earnings per Earnings number share £ million million pence Basic earnings from continuing operations 15.5 321.4 4.8 Share options - 2.9 - Employee share and incentive schemes - 6.8 (0.1) Diluted earnings from continuing operations 15.5 331.1 4.7 Basic earnings from discontinued operations 7.1 321.4 2.2 Share options - 2.9 - Employee share and incentive schemes - 6.8 (0.1) Diluted earnings from discontinued 7.1 331.1 2.1operations Basic earnings from continuing operations 15.5 321.4 4.8 Exceptional items - - - Intangible amortisation 1.3 - 0.4 Basic earnings before intangibleamortisation andexceptional items 16.8 321.4 5.2 Share options - 2.9 - Employee share and incentive schemes - 6.8 (0.1) Diluted earnings before intangibleamortisation andexceptional items 16.8 331.1 5.1 Year ended 31 December 2005 Weighted average shares Earnings per Earnings number Share £ million million Pence Basic and diluted earnings from continuing (16.8) 323.3 (5.2)operations Basic and diluted earnings from 20.8 323.3 6.5discontinued operations Earnings per share from continuing operations has been calculated on a loss of£16.8 million, as a result, there are no dilultive ordinary shares. 7. DIVIDENDS After the balance sheet date the directors declared a dividend of 4.2 pence pershare payable on 2 January 2007 to equity holders on the register at the closeof business on 24 November 2006. The dividend has not been provided for andthere are no income tax consequences for the company. 8. RECONCILIATION OF MOVEMENTS IN TOTAL EQUITY Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Total recognised income and expenseattributable to equity holders of the parent (43.3) 17.8 (12.1) Dividends (24.4) (23.4) (36.4) Shares issued 0.9 89.5 89.7 Movements relating to equity settled 0.1 (1.4) (0.8)share-based payments Effect of adoption of IAS 32 and IAS 39 on - (22.1) (22.1)1 January 2005 Net (decrease)/increase in total equity (66.7) 60.4 18.3 Total equity as at the beginning of the 322.6 304.3 304.3period Total equity as at end of the periodattributable to theequity holders of the parent 255.9 364.7 322.6 9. ANALYSIS OF NET DEBT 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Cash at bank and in hand 232.0 202.4 320.8 Short-term investments 24.0 96.9 31.1 Cash and cash equivalents disclosed on 256.0 299.3 351.9the balance sheetOverdrafts (19.2) (27.1) (19.2) 236.8 272.2 332.7 Cash and cash equivalents (includingoverdrafts) classifiedas held for sale 69.0 - - Total cash and cash equivalents 305.8 272.2 332.7 Current bank loans (13.1) (30.0) (19.9) Non current bank loans (688.1) (586.6) (558.3) Bank loans classified as held for sale (32.6) - - Net debt as at the end of the period (428.0) (344.4) (245.5) Net debt is analysed between the amount disclosed in the balance sheet andamounts classified as held for sale as follows: 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Net debt disclosed on the balance sheet (464.4) (344.4) (245.5) Net debt classified as held for sale 36.4 - - Total net debt as at the end of the (428.0) (344.4) (245.5)period INDEPENDENT REVIEW REPORT BY KPMG AUDIT Plc TO AMEC plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the Consolidated IncomeStatement, Consolidated Statement of Recognised Income and Expense, ConsolidatedBalance Sheet, Consolidated Cash Flow Statement and the related notes. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for the use in the UK. A review consistsprincipally of making enquiries of group management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements of Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMG Audit PlcChartered accountantsManchester31 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AMFW.L