1st Sep 2005 07:02
AMEC PLC01 September 2005 1 September 2005 AMEC plc Interim Results 2005 Delivery against expectations with good performances from Engineering and Technical Services and Oil and Gas Financial Highlights: • Underlying pre-tax profit* up 7.1% to £40.9m • IFRS pre-tax profit** £35.3m in line with 2004 • Interim dividend increased by 5.3% to 4.0p per share • Value of PPP portfolio increased to £99m • Balance sheet strengthened Business Highlights: • Strategic acquisitions in Oil and Gas and Nuclear • Engineering and Technical Services profit*** £36.2m, up 22% • Oil and Gas profit*** £21.5m, up 9% • Project Solutions profit**** £9.0m, down 21% on weak UK construction results • Order book up 20% to £2.9bn Commenting on the results and prospects, Chief Executive, Sir Peter Mason KBE,said: "These results reflect our strategy focussed on Oil and Gas and TechnicalServices, which are now the main engines of our profit growth. Results fromProject Solutions were disappointing, but the real strength of this business isbeing created in our portfolio of equity investments, where we expect to releasesubstantial value over time. Our markets are generally healthy and strong demand in oil and gas, newopportunities in nuclear and a 20% uplift in the order book give us confidencein the trading outlook. However, like most other UK companies, we expect to seea rise in pension costs, although AMEC will remain one of only a very few FTSE250 companies to have a pension surplus." * Before the impact of fair value based standards of £4.2m (additional chargesarising from the adoption of IFRS 2 Share based payments of £1.7m and IAS 19Employee benefits of £2.5m), IAS 39 of £0.2m, joint venture tax of £1.2m,intangible amortisation of £1.8m and business disposals and closures of £nil,but including joint venture profit before tax of £3.3m. ** Before the impact of intangible amortisation of £1.8m and business disposalsand closures of £nil. *** Before the impact of IAS 39 of £0.2m, joint venture tax of £1.2m, intangibleamortisation of £1.8m and business disposals and closures of £nil, but includingjoint venture profit before tax of £3.3m. **** Before the impact of IAS 39 of £0.2m, joint venture tax of £1.2m,intangible amortisation of £1.8m and business disposals and closures of £nil andbefore joint venture interest of £6.5m, but including joint venture profitbefore tax of £3.3m. Financial highlights*Six months ended 30 June 2005 2004 £m £m Revenue 2,256.4 2,162.7 +4.3% Pre-tax profit, underlying** 40.9 38.2 +7.1% IFRS pre-tax profit Before intangible amortisation and business disposals and closures*** 35.3 35.1 After intangible amortisation and business disposals and closures**** 33.5 14.8 Net debt 344.4 388.7 Diluted earnings per share, underlying** 8.3p 8.4p Diluted earnings per share, IFRS*** 7.4p 8.0p -7.5% Dividend per share 4.0p 3.8p +5.3% * Unless otherwise stated, amounts and percentage movements throughout thisdocument relating to the income statement are stated before the impact of IAS39, Financial Instruments: Recognition and Measurement ("IAS 39"), joint venturetax, intangible amortisation and business disposals and closures. Amounts andpercentage movements relating to profit and margin of Engineering and TechnicalServices, Oil and Gas and Project Solutions activities are stated beforecorporate costs of £11.0m (2004: £12.1m), the impact of IAS 39 of £0.2m (2004:not applicable), joint venture tax of £1.2m (2004: £1.2m), intangibleamortisation of £1.8m (2004: £0.7m) and business disposals and closures of £nil(2004: £19.6m) but including joint venture profit before tax of £3.3m (2004:£5.6m). ** Before the impact of fair value-based standards of £4.2m (2004: £1.9m),additional charges arising from the adoption of IFRS 2 Share-based payments of£1.7m (2004: £0.8m) and IAS 19 Employee benefits of £2.5m (2004: £1.1m)), IAS 39£0.2m (2004: not applicable), joint venture tax of £1.2m (2004: £1.2m),intangible amortisation of £1.8m (2004: £0.7m) and business disposals andclosures of £nil (2004: £19.6m) but including joint venture profit before tax of£3.3m (2004: £5.6m). *** Before the impact of intangible amortisation of £1.8m (2004: £0.7m) andbusiness disposals and closures of £nil (2004: £19.6m). **** After the impact of intangible amortisation of £1.8m (2004: £0.7m) andbusiness disposals and closures of £nil (2004: £19.6m). 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 interim results slide presentation and speaking remarks will be available onAMEC's web site www.amec.com from approximately 9:00 am on 1 September 2005. Enquiries to:AMEC plc: + 44 (0)20 7634 0000 Analysts and investors:Sir Peter Mason KBE, Chief ExecutiveStuart Siddall, Finance DirectorNeil Jamieson, Director of Investor Relations Media:Juliet Sychrava, Director of Corporate CommunicationsCharles Reynolds, Head of Media Relations BUSINESS AND FINANCIAL REVIEW International Financial Reporting Standards ("IFRS")Results for the six months ended 30 June 2005 and the comparative period arereported under IFRS. As this is the first set of accounts prepared under IFRS,this business and financial review is based on an underlying IFRS profit figurewhich is adjusted for additional charges for share options and pensions andwhich excludes the impact of IAS 39, joint venture tax, intangible amortisationand business disposals and closures, but includes joint venture profit beforetax. Strategic developmentsIn 2005 we have been successful in completing major strategic acquisitions inour Oil and Gas and Nuclear businesses. The acquisition in January of Paragon Engineering Services Inc. ("Paragon"), an oil and gas engineering services company, for approximately £20m provides us with a major presence in Houston, the home of many of the world's major oil and gas companies. In July, we acquired NNC Holdings Limited ("NNC"), the UK's leading private sector nuclear services business for £39m whilst in April, a 49% interest in the French nuclear engineering business Game Nucleaire SAS was acquired for £7m. The nuclear market is one of the most exciting new prospects we see today, with opportunities in the UK alone initially valued at around £2bn a year. These acquisitions have strengthened our position to support the operations, maintenance and decommissioning of civil nuclear infrastructure in the UK, France and Canada and will also allow us to exploit new business opportunities in other countries. In our Engineering and Technical Services business ("ETS"), we continued to add bolt-on businesses and expect to make similar acquisitions in the second half of 2005 and beyond. Our successful Share Placing ("the Placing") in January in part provided fundingfor these acquisitions whilst maintaining our operational flexibility. Havingcompleted those acquisitions targeted in Oil and Gas and Nuclear, no furthermajor acquisitions are currently planned. Our balance sheet is now stronger andwe do not feel constrained either operationally or in terms of our ability tocontinue with our current strategy. Results of operationsRevenue for the period increased by £93 million to £2,256m, (2004: £2,163m)principally as a result of good growth in ETS, offset by further reductions inconstruction activities, as planned. Underlying pre-tax profit of £40.9m is up 7% and in line with the Board'searlier expectations. In our IFRS Restatement Report issued on 27 June 2005, we indicated that AMECwould face increased charges arising from the application of fair valuestandards to share-based payments and pensions. From a 2004 starting point underUK Generally Accepted Accounting Principles ("GAAP"), these have resulted in anaggregate additional charge of around £4m in the first half and an expected £8mfor the full year. Pre-tax profit under IFRS at £35.3m is in line with earlier expectations and thecomparative period (2004: £35.1m). The effective tax rate at 33.5% has trended upwards from last year (2004:32.5%). As AMEC extends its activities outside of its home territories we canexpect to pay tax at a higher rate, as previously advised. Earnings per share is affected both by the Placing in January and the increasedtax charge. In January, we indicated that the Placing was linked to acquisitionsand PPP equity investments neither of which were expected to be earningsaccretive in 2005. In line with the increase in our underlying pre-tax profit, the Board hasdeclared a 5.3% increase in the interim dividend to 4.0 pence per share. Thedilutive impact of the Placing reduces dividend cover based on an underlyingpre-tax profit to 2.1 times (2004: 2.2 times). PensionsAs noted above, the introduction of IFRS has affected pensions accounting, whereincreased volatility in the income statement can now be expected. In addition to the IFRS changes, we expect improving mortality rates to increasecosts for defined benefits schemes like ours. Our UK schemes are undergoingtheir triennial valuation as at April 2005. We expect this to result in asubstantial reduction of our pre-tax pensions surplus under IAS 19 which wasabout £120m as at 31 December 2004. Despite this, we expect to remain one of thefew FTSE 250 companies with a pensions surplus although, along with others, wecan expect costs to rise in 2006. Taking account of the impact of IAS 19 andimproved mortality rates, we expect that pension costs will be approximately£10m higher in 2006 than they were in 2004. OutlookThe Board continues to see the outturn for 2005 being in line with its earlierexpectations, after taking into account IFRS. We expect good underlying growth in our three business segments in 2006.However, earnings will be held back by the change in pension costs arising fromthe adoption of IFRS and improved mortality assumptions that will beincorporated when finalising the valuation of our UK schemes later this year. Segmental reviewCommentary for each of AMEC's principal segments of activity is set out below. Engineering and Technical Services------------------------------------£ million 2005 2004 changeRevenue 1,167.8 992.6 +18%Profit 36.2 29.6 +22%Margin 3.1% 3.0%Net liabilities (4.0) (2.0)Order intake to sales 10% ahead 5% ahead** As at 31 December 2004 ETS revenue increased by 18% due to increased activity in the MultitechnicalServices business, on UK framework contracts and in Iraq. Profit increased by22% to £36.2m. Multitechnical Services margins were improved in Holland and Belgium, althoughdemand remains flat in Belgium. The Environmental Services business had a strong first half, due largely toincreased US Federal work, including US Air Force contracts both in Iraq, the USand elsewhere around the world. AMEC's share of 2005 task orders in Iraq is now worth US$375m. During the firsthalf, our activities there produced an increased contribution compared with thesecond half of 2004 and the overall level of contribution in 2005 will, subjectto the security situation, increase as expected. With continuing uncertainty inthe region it is difficult to predict levels of activity beyond the firstquarter of 2006. Latest economic indicators show that capital expenditure in US industrialmarkets has returned to levels last seen at the beginning of 2002. We are seeingsome early signs of recovery in our pulp and paper and cement markets and wehave won some new contracts. Through our management actions and with these earlysigns of market recovery, we should see some improvement in profitability in theNorth American activities of our Design and Engineering business over the nextyear or so.Net liabilities reflect the disposal of properties in France in December 2004,which has been offset by increased activity in Iraq. Order intake has been good in the period, particularly in Continental Europe.This underpins our expectations that we will see volume growth in 2005 and 2006in the Multitechnical Services business. ETS remains a strongly growingbusiness, where we expect to see significant long-term improvements in profit asa result of volume growth and the ongoing margin improvement programme inMultitechnical Services. Oil and Gas-------------£ million 2005 2004 changeRevenue 621.4 599.1 +4%Profit 21.5 19.8 +9%Margin 3.5% 3.3%Net assets 137.5 157.1Order book 1,800 1,300** As at 31 December 2004 Revenue increased by 4% to £621m, including over £100m (2004: £50m) in respectof a lump-sum fabrication project on which we are not earning any margin. Afteradjusting for this activity, underlying margin for the period improved by 0.5%compared with 2004. In the first half, about 70% of revenue was generated fromservices, compared with 50% several years ago. Profit was 9% ahead of 2004 and reflected a good performance across our UKupstream activities and a first contribution from Paragon, which has beensuccessfully integrated and has performed in line with our expectations. We remain confident that reported margins will improve following completion ofcapital projects in the second half of this year. Net assets are £137.5m, having increased in 2004 by about £40m due to capitalemployed on two lump sum upstream projects and a major pipeline project. Weconsider that we have taken a cautious position on these projects and that netassets will decline to normal levels. The order book has improved this year by £500m to £1.8bn. New contracts includebrownfield services for Talisman's Tweedsmuir project, the hook-up andcommissioning of Nexen's Buzzard platform and a £280m eight-year alliancecontract for National Grid Transco to replace gas mains along a section of theM1 corridor in the UK. The order book is strong, increasingly services-based and well diversifiedgeographically. Whilst revenue growth will be held back as a result of thechanging nature of asset procurement, we expect margins and profits to rise.This remains a very strong market, with significant long-term opportunities inbrownfield developments, new areas of production and with smaller private andnational oil companies around the world. Amongst our peer group, those nearestto the exploration end of the investment cycle are the first to benefit fromincreased oil and gas spending. With our focus on production facilities, weshould be next, and we will have the follow-through with our long-termoperations support services activities. Project Solutions-------------------£ million 2005 2004 changeRevenue 489.3 593.9 -18%Profit (before joint venture 9.0 11.4 -21%interest)Profit (after joint venture 2.5 5.0 -50%interest)Margin (before joint venture 1.8% 1.9%interest)Net assets 112.0 63.1Order book 1,100 1,100** As at 31 December 2004 Revenue for the period declined by 18% to £489m, reflecting our planned exitfrom non-core construction activities, while profit overall reflected mixedresults from our project portfolio. Our PPP equity investments business performed in-line with expectations. TheDevelopments business saw a small number of project sales in the period, similarto 2004. We expect to see a number of transactions completed in the second half,providing an annual contribution in line with previous years. We have a good position in the UK wind energy market, where we are makingprogress with our various planning consents and continue to expense ourdevelopment costs. Performance in the first half was as expected, but givendelays in the planning process, we now expect to see a small loss for the fullyear, similar to 2004. However, once planning consents are secured, we expect tobe able to realise value quite quickly. We saw a good performance from other project activities, but these were notenough to offset weak performance in UK Construction Services, where we havetaken a provision to cover cost overruns on a PPP road project. We do not expectthis problem to recur, as we are nearing completion of all our PPP roadprojects. We are reviewing our future participation in PPP road projects and inany event will not take any further contracts unless contract terms areimproved. Net assets have increased, principally reflecting the sharp reduction in advancecash. The order book was £1.1bn at the half year, in line with that as at 31 December2004. We remain confident that our portfolio of investments will realisesubstantial value over the next two to three years as key milestones areachieved. PPP ValuationThe book value of our eleven ongoing PPP projects has increased from £42m at 31December 2004 (excluding the Cross Israel Highway, which was sold), to £56mcurrently. The main reasons for the increase are the Docklands Light RailwayWoolwich Arsenal extension in London and our 23% interest in the Incheon Bridgeproject in South Korea, both of which have reached financial close. Based on the future discounted cash flows arising from our PPP concessions, thedirectors' valuation of the portfolio has increased from £77m at March 2005 to£99m. The overall weighted average discount rate is 10.6%, which is similar tothe rate used in the March 2005 valuation. The value in our PPP portfolio arises largely from concessions where revenuesflow from availability fees. We understand that the International Financial Reporting InterpretationsCommittee is to continue to seek a solution to concession accounting, but maynot succeed in time for this to be adopted in AMEC's 2005 annual report andaccounts. AMEC continues to account for its PPP interests in-line with UK GAAP. Net debt and cash flowAverage weekly net debt in the period ended 30 June 2005 was £380m. Normaltrends indicate that the average net debt is usually about £30 - 40m higher forthe full year, and we are expecting average net debt to be in the range of £410mto £420m for 2005. The principal reasons for the increase in average weekly netdebt from our original expectation of £350m are slow payment on a costreimbursable oil and gas fabrication project, received since 30 June 2005, andthe sharp fall in advance cash in the first half. Net debt has reduced by £45m since 30 June 2004. The main trading outflowsrelate to advance cash, which has reduced by £73m to £53m, and Iraq, wherecapital employed (currently £37m) has increased in line with activity, althoughpayments have been slower than expected. Capital expenditure, businessdisposals, Paragon and the other acquisitions within ETS had a cost of £21m.Offsetting these outflows were the proceeds from the Placing and thesecuritisation programme in Continental Europe which totalled £145m and othertrading which generated £127m. We are taking a cautious view in estimating the net debt as at 31 December 2005.If we are successful in reducing Oil and Gas capital employed, net debt shouldfall below £210m as at this date. If net debt is at this level it will be about£70m below the previous year, largely as a result of net proceeds retained fromthe Placing and the securitisation programme in Continental Europe. Net interest payableInterest costs increased in the first half from £6.0m to £12.7m, largely becauseof the way in which the gain on the disposal of PPP subordinated debt wasrequired to be reported in our 2004 results as a credit to interest. CONSOLIDATED INCOME STATEMENT Six months ended 30 June 2005 Before intangible Intangible amortisation amortisation and business and business disposals disposals and and closures closures Total Note £ million £ million £ million Revenue 2 2,256.4 - 2,256.4 Cost of sales (1,976.7) - (1,976.7) ---------- ---------- --------- Gross profit 279.7 - 279.7 Administrative expenses (233.8) (1.8) (235.6) ---------- ---------- --------- Profit/(loss) before businessdisposalsand closures 45.9 (1.8) 44.1 Loss on business disposals and - - -closures ---------- ---------- --------- Profit/(loss) before netfinancing costs 2 45.9 (1.8) 44.1 ---------- ---------- ---------Financial income 9.4 - 9.4 Financial expense (22.1) - (22.1) ---------- ---------- --------- Net financing costs (12.7) - (12.7) Share of post tax results fromjoint ventures and associates 2.1 - 2.1 ---------- ---------- --------- Profit/(loss) before income tax 35.3 (1.8) 33.5 Income tax 3 (11.1) - (11.1) ---------- ---------- --------- Profit/(loss) for the period 24.2 (1.8) 22.4 ========== ========== ========= Attributable to: Equity holders of the company 22.6 Minority interests (0.2) --------- 22.4 ========= Earnings per share: 4 Basic 7.0p Diluted 6.8p CONSOLIDATED INCOME STATEMENT Six months ended 30 June 2004 Before intangible Intangible amortisation amortisation and business and business disposals disposals and and closures closures Total Note £ million £ million £ million Revenue 2 2,162.7 - 2,162.7 Cost of sales (1,894.2) - (1,894.2) ---------- ---------- --------- Gross profit 268.5 - 268.5 Administrative expenses (231.8) (0.7) (232.5) ---------- ---------- --------- Profit/(loss) before businessdisposals and closures 36.7 (0.7) 36.0 Loss on business disposals andclosures - (19.6) (19.6) ---------- ---------- --------- Profit/(loss) before netfinancing costs 2 36.7 (20.3) 16.4 ---------- ---------- ---------Financial income 13.3 - 13.3 Financial expense (19.3) - (19.3) ---------- ---------- --------- Net financing costs (6.0) - (6.0) Share of post tax results fromjoint ventures and associates 4.4 - 4.4 ---------- ---------- --------- Profit/(loss) before income tax 35.1 (20.3) 14.8 Income tax 3 (10.6) - (10.6) ---------- ---------- --------- Profit/(loss) for the period 24.5 (20.3) 4.2 ========== ========== ========= Attributable to: Equity holders of the company 3.9 Minority interests 0.3 --------- 4.2 ========= Earnings per share: 4 Basic 1.3p Diluted 1.3p CONSOLIDATED INCOME STATEMENT Year ended 31 December 2004 Before intangible Intangible amortisation amortisation and business and business disposals disposals and closures and closures Total Note £ million £ million £ million Revenue 2 4,657.5 - 4,657.5 Cost of sales (4,053.5) - (4,053.5) ---------- ---------- --------- Gross profit 604.0 - 604.0 Administrative expenses (480.0) (0.5) (480.5) ---------- ---------- --------- Profit/(loss) before businessdisposals and closures 124.0 (0.5) 123.5 Loss on business disposals andclosures - (21.5) (21.5) ---------- ---------- --------- Profit/(loss) before netfinancing costs 2 124.0 (22.0) 102.0 ---------- ---------- ---------Financial income 28.3 - 28.3 Financial expense (47.1) - (47.1) ---------- ---------- --------- Net financing costs (18.8) - (18.8) Share of post tax results fromjoint ventures and associates 8.0 - 8.0 ---------- ---------- --------- Profit/(loss) before income tax 113.2 (22.0) 91.2 Income tax 3 (39.5) - (39.5) ---------- ---------- --------- Profit/(loss) for the period 73.7 (22.0) 51.7 ========== ========== ========= Attributable to: Equity holders of the company 50.9 Minority interests 0.8 --------- 51.7 ========= Earnings per share: 4 Basic 17.3p Diluted 16.8p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £ million £ million £ million Exchange differences ontranslation of foreign subsidiaries (net of tax) 2.7 (11.0) (11.8) Actuarial losses on definedbenefit pension schemes (net of tax) - - (6.8) Net loss on hedges of netinvestment in foreign subsidiaries (1.3) - - Cash flow hedges: Effective portion of changes infair value (6.6) - - Transferred to the incomestatement 0.4 - - ---------- ---------- --------- Net expense recognised directlyin equity (4.8) (11.0) (18.6) Profit for the period 22.4 4.2 51.7 ---------- ---------- --------- Total recognised income andexpense for the period 17.6 (6.8) 33.1 ========== ========== ========= Attributable to: Equity holders of the company 17.8 (7.1) 32.3 Minority interests (0.2) 0.3 0.8 ---------- ---------- --------- Total recognised income andexpense for the period 17.6 (6.8) 33.1 ========== ========== ========= CONSOLIDATED BALANCE SHEET Note 30 June 30 June 31 December 2005 2004 2004 £ million £ million £ million ASSETS Non-current assets Property, plantand equipment 149.1 186.4 149.0 Intangibleassets 408.5 364.7 392.5 Interests injoint ventures 64.5 63.0 75.6 Otherinvestments 6.7 15.4 16.0 Otherreceivables 24.7 21.5 21.5 Retirementbenefit assets 123.2 124.7 118.9 Deferred taxassets 61.5 55.7 45.5 ---------- --------- ----------- Totalnon-currentassets 838.2 831.4 819.0 ---------- --------- ----------- Current assets Inventories 96.6 120.4 87.2 Trade and otherreceivables 1,598.5 1,671.3 1,823.8 Derivativefinancialinstruments 3.0 - - Cash and cashequivalents 299.3 288.3 299.5 ---------- --------- ----------- Total currentassets 1,997.4 2,080.0 2,210.5 ---------- --------- ----------- Total assets 2,835.6 2,911.4 3,029.5 ---------- --------- ----------- LIABILITIES Current liabilities Bank loans andoverdrafts (57.1) (221.5) (46.0) Trade and otherpayables (1,569.0) (1,738.8) (1,911.0) Derivativefinancialinstruments (16.6) - - Current taxpayable (28.7) (18.9) (29.9) ---------- --------- ----------- Total currentliabilities (1,671.4) (1,979.2) (1,986.9) ---------- --------- ----------- Non-current liabilities Bank loans (586.6) (455.5) (537.2) Trade and otherpayables (69.7) (65.1) (67.8) Derivativefinancialinstruments (4.4) - - Retirementbenefitliabilities (50.1) (51.3) (52.3) Deferred taxprovisions (56.9) (52.9) (45.6) Other provisions (29.1) (28.8) (32.1) ---------- --------- ----------- Totalnon-currentliabilities (796.8) (653.6) (735.0) ---------- --------- ----------- Totalliabilities (2,468.2) (2,632.8) (2,721.9) ---------- --------- ----------- Net assets 2 367.4 278.6 307.6 ========== ========= =========== EQUITY Share capital 166.4 150.7 151.0 Share premiumaccount 89.4 87.7 88.8 Hedging andtranslationreserves (34.3) (11.0) (11.8) Capitalredemptionreserve 17.2 17.2 17.2 Retainedearnings 126.0 26.6 59.1 ---------- --------- ----------- Total equity 364.7 271.2 304.3 Minorityinterests 2.7 7.4 3.3 ---------- --------- ----------- Total equity andminorityinterests 367.4 278.6 307.6 ========== ========= =========== CONSOLIDATED CASH FLOW STATEMENT Six Six months months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Note £ million £ million £ million Cash (absorbed)/generatedfrom operations 7 (83.0) (120.5) 12.9 Interest paid (20.1) (14.4) (46.6) Taxation paid (12.3) (13.6) (26.6) -------- -------- --------- Net cash flow fromoperating activities (115.4) (148.5) (60.3) -------- -------- --------- Cash flow from investing activities Acquisition and disposal ofsubsidiaries, net of cashacquired (24.4) (9.0) (11.0) Acquisition and disposalof joint ventures andassociates 3.6 (5.2) (0.4) Purchase and disposal of property,plant and equipmentand intangible assets (18.4) (14.4) 1.4 Interest received 9.2 10.4 29.1 Dividends received fromjoint ventures 2.4 0.7 0.2 -------- -------- --------- Net cash flow frominvesting activities (27.6) (17.5) 19.3 -------- -------- --------- Net cash flow beforefinancing activities (143.0) (166.0) (41.0) -------- -------- --------- Cash flow from financing activities Proceeds from sharesissued 89.5 6.0 7.4 Proceeds from borrowings 71.5 108.4 (1.7) Dividends paid (11.2) (10.5) (30.8) -------- -------- --------- Net cash flow fromfinancing activities 149.8 103.9 (25.1) -------- -------- --------- Increase/(decrease) incash and cash equivalents 6.8 (62.1) (66.1) Cash and cash equivalents as at thebeginning of theperiod 270.0 341.9 341.9 Exchange losses on cashand cash equivalents (4.6) (10.1) (5.8) -------- -------- --------- Cash and cash equivalentsas at the end of theperiod 272.2 269.7 270.0 ======== ======== ========= Cash and cash equivalents consist of: Cash at bank and in hand 202.4 195.1 214.5 Short-term investments 96.9 93.2 85.0 -------- -------- --------- 299.3 288.3 299.5 Overdrafts (27.1) (18.6) (29.5) -------- -------- --------- Cash and cash equivalents 8 272.2 269.7 270.0 ======== ======== ========= NOTES 1. PREPARATION OF INTERIM RESULTS EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedaccounts of the group be prepared in accordance with International FinancialReporting Standards ("IFRS") adopted for use in the EU ("adopted IFRS"). Detailsof how the group's results and financial position are impacted by the change toIFRS are set out in AMEC's IFRS Restatement Report ("the Restatement Report")which was issued on 27 June 2005. This also includes reconciliations from UKGenerally Accepted Accounting Principles ("UK GAAP") to IFRS for the 2004interim report and annual accounts. The interim results have been prepared on the basis of the recognition andmeasurement requirements of IFRS in issue that either are endorsed by the EU andeffective (or available for early adoption) as at 31 December 2005 or areexpected to be endorsed and effective (or available for early adoption) as at 31December 2005. Based on these adopted and unadopted IFRS, the directors havemade assumptions about the accounting policies expected to be applied, when thefirst annual IFRS consolidated accounts are prepared for the year ending 31December 2005 ("first annual IFRS consolidated accounts"). These assumptions areset out in the Restatement Report. In particular, the directors have assumed that the amendments to IAS 19,Employee Benefits, issued in December 2004 by the International AccountingStandards Board will be endorsed by the EU in sufficient time for use in thefirst annual IFRS consolidated accounts. This will allow immediate recognitionof actuarial gains and losses through reserves. In addition, the adopted IFRS that will be effective (or available for earlyadoption) in the first annual IFRS consolidated accounts are still subject tochange and to additional interpretations and therefore cannot be determined withcertainty. Accordingly, the accounting policies for 2005 will be determinedfinally only when the first annual IFRS consolidated accounts are prepared. The directors have not applied the draft International Financial ReportingInterpretations Committee ("IFRIC") Interpretations D12- D14 (the "draftInterpretations") on service concession arrangements to AMEC's PPP activities.These draft Interpretations were made available for comment during the earlypart of 2005 and IFRIC is currently reviewing the responses it has received. Thedraft Interpretations could change during finalisation and consequently, thedirectors consider that they may not be available for adoption in their currentformat in either 2005, or later. Until these interpretations are finalised, IFRScontains no accounting requirements that specifically apply to serviceconcession arrangements. Accordingly, AMEC has applied IAS 8, Accountingpolicies, changes in accounting estimates and errors, in choosing its accountingpolicies and considers that application note F to the UK standard on reportingthe substance of transactions (FRS 5) is consistent with the Framework and otherIFRS. Selecting accounting policies for service concessions under IFRS that areconsistent with application note F allows AMEC to minimise the changes requiredto accounting policies either in 2005 or later. The comparative figures for the year ended 31 December 2004 are not thestatutory accounts for that financial year. Those accounts, which were preparedunder UK GAAP, have been reported on by the auditors and delivered to theregistrar of companies. The report of the auditors was unqualified and did notcontain statements under section 237(2) or (3) of the Companies Act 1985. 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE NET FINANCING COSTS AND NET ASSETS Revenue Six Six months months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £ million £ million £ million Class of business:Engineering and Technical Services 1,167.8 992.6 2,252.0Oil and Gas 621.4 599.1 1,172.6Project Solutions 489.3 593.9 1,290.8 -------- -------- --------- 2,278.5 2,185.6 4,715.4Internal revenue (22.1) (22.9) (57.9) -------- -------- --------- 2,256.4 2,162.7 4,657.5 ======== ======== ========= 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE NET FINANCING COSTS AND NET ASSETS(continued) Revenue Six Six months months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £ million £ million £ million Geographical origin:United Kingdom 850.0 934.7 1,887.0Rest of Europe 777.9 681.4 1,594.6Americas 334.9 303.4 686.3Rest of the world 293.6 243.2 489.6 -------- -------- --------- 2,256.4 2,162.7 4,657.5 ======== ======== ========= Profit/(loss) before net financing costs Six Six months months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £ million £ million £ million Class of business:Engineering and Technical Services 35.5 28.8 79.5Oil and Gas 20.5 18.5 49.2Project Solutions 0.9 1.5 19.6 -------- -------- --------- 56.9 48.8 148.3 Corporate costs (11.0) (12.1) (24.3) -------- -------- --------- 45.9 36.7 124.0 Intangible amortisation (1.8) (0.7) (0.5) Loss on business disposals and closures - (19.6) (21.5) -------- -------- --------- 44.1 16.4 102.0 ======== ======== ========= Geographical origin:United Kingdom 17.3 24.0 68.7Rest of Europe 15.7 21.0 49.0Americas 7.2 1.6 7.3Rest of the world 16.7 2.2 23.3 -------- -------- --------- 56.9 48.8 148.3 Corporate costs (11.0) (12.1) (24.3) -------- -------- --------- 45.9 36.7 124.0 Intangible amortisation (1.8) (0.7) (0.5) Loss on business disposals and closures - (19.6) (21.5) -------- -------- --------- 44.1 16.4 102.0 ======== ======== ========= 2. ANALYSIS OF REVENUE, PROFIT/(LOSS) BEFORE NET FINANCING COSTS AND NET ASSETS(continued) Net assets 30 June 30 June 31 December 2005 2004 2004 £ million £ million £ million Class of business:Engineering and Technical Services (4.0) (2.0) (70.7)Oil and Gas 137.5 157.1 129.0Project Solutions 112.0 63.1 61.9 -------- -------- --------- 245.5 218.2 120.2 Intangible assets 408.5 364.7 392.5Net debt (344.4) (388.7) (283.7)Unallocated net assets 57.8 84.4 78.6 -------- -------- --------- 367.4 278.6 307.6 ======== ======== ========= Geographical origin:United Kingdom 157.9 154.3 61.4Rest of Europe (70.2) (31.2) (67.4)Americas 110.0 90.3 105.4Rest of the world 47.8 4.8 20.8 -------- -------- --------- 245.5 218.2 120.2 Intangible assets 408.5 364.7 392.5Net debt (344.4) (388.7) (283.7)Unallocated net assets 57.8 84.4 78.6 -------- -------- --------- 367.4 278.6 307.6 ======== ======== ========= 3. INCOME TAX Income tax on the profit/(loss) before intangible amortisation and businessdisposals and closures for the six months ended 30 June 2005 is based on aneffective rate of 33.5 per cent, which has been calculated by reference to theprojected charge for the full year. 4. EARNINGS PER SHARE The calculation of the average number of shares in issue has been made havingdeducted the shares held by the trustees of the Long-Term Incentive Plan and thePerformance Share Plan 2002 and those held by the qualifying employee shareownership trust. Six months ended 30 June 2005 Weighted average shares Earnings per Earnings number share £ million million pence Basic earnings 22.6 321.4 7.0 Share options - 2.9 (0.1) Employee share and incentive schemes - 6.8 (0.1) -------- -------- --------- Diluted earnings 22.6 331.1 6.8 ======== ======== ========= Six months ended 30 June 2004 Weighted average shares Earnings per Earnings number share £ million million pence Basic earnings 3.9 294.5 1.3 Share options - 2.9 - Employee share and incentive schemes - 5.9 - -------- -------- --------- Diluted earnings 3.9 303.3 1.3 ======== ======== ========= Year ended 31 December 2004 Weighted average shares Earnings per Earnings number share £ million million pence Basic earnings 50.9 295.0 17.3 Share options - 1.5 (0.1) Employee share and incentive schemes - 6.7 (0.4) -------- -------- --------- Diluted earnings 50.9 303.2 16.8 ======== ======== ========= 4. EARNINGS PER SHARE (continued) In order to appreciate the effects of the transition to IFRS on the reportedunderlying performance, additional calculations of earnings per share arepresented. Six months ended 30 June 2005 Weighted average shares Earnings per Earnings number share £ million million pence Basic earnings, IFRS 24.4 321.4 7.6 Impact of IAS 39 0.2 - 0.1 -------- -------- --------- Basic earnings, adjusted 24.6 321.4 7.7 Impact of fair value based standards** 2.8 - 0.8 -------- -------- --------- Basic earnings, underlying 27.4 321.4 8.5 ======== ======== ========= Basic earnings, IFRS 24.4 321.4 7.6 Share options - 2.9 - Employee share and incentive schemes - 6.8 (0.2) -------- -------- --------- Diluted earnings, IFRS 24.4 331.1 7.4 Impact of IAS 39 0.2 - - -------- -------- --------- Diluted earnings, adjusted 24.6 331.1 7.4 Impact of fair value based standards** 2.8 - 0.9 -------- -------- --------- Diluted earnings, underlying 27.4 331.1 8.3 ======== ======== ========= * Before intangible amortisation and business disposals and closures.* * Additional charges arising from the adoption of IFRS 2 Share-based paymentsof £1.1 million (net of tax) and IAS 19 Employee benefits of £1.7 million (netof tax). 4. EARNINGS PER SHARE (continued) Six months ended 30 June 2004 Weighted average shares Earnings per Earnings number share £ million million pence Basic earnings, IFRS 24.2 294.5 8.2 Impact of IAS 39 - - - -------- -------- --------- Basic earnings, adjusted 24.2 294.5 8.2 Impact of fair value standards** 1.3 - 0.5 -------- -------- --------- Basic earnings, underlying 25.5 294.5 8.7 ======== ======== ========= Basic earnings, IFRS 24.2 294.5 8.2 Share options - 2.9 - Employee share and incentive schemes - 5.9 (0.2) -------- -------- --------- Diluted earnings, IFRS 24.2 303.3 8.0Related Shares:
AMFW.L