13th Dec 2007 07:01
AMEC PLC13 December 2007 AMEC PLC PRE-CLOSE TRADING UPDATE • Energy, power and process end markets continue to be strong • Strong performance across all divisions • 2007 pre-tax profit* towards the upper end of market expectations** • Aggregate post-tax gain on divestments in 2007 not less than £220 million • Positive progress on legacy issues continuing; further net exceptional provision release of at least £5 million expected in second half 2007 • Expected net cash as at 31 December 2007 c.£650 million • Operational Excellence launched; new divisional margin targets announced; group targets continue to be six per cent in 2008 and eight per cent in 2010 * Profit for continuing operations before intangible amortisation and pre-taxexceptional profits. ** Range between £111-122 million. Chief Executive Samir Brikho said: "AMEC continues to make strong progress, with trading performance being ahead ofexpectations both as a result of end market strength and our own strategicinitiatives. "Each of our divisions is expected to make progress next year, and I amconfident that AMEC will deliver the six per cent margin targeted in 2008. "In the longer term, our end markets are expected to remain buoyant for theforeseeable future, particularly in natural resources. Our OperationalExcellence programme will also be a major contributor to AMEC delivering itsmargin target of eight per cent by 2010." AMEC expects to announce preliminary results for the year ending 31 December2007, on Wednesday 12 March 2008. 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, some ofwhich will be outside the control of the group. Such factors could cause thegroup's actual results for future periods to differ materially from thoseexpressed in any forward looking statements made in this document. Conference call and presentationA telephone conference call for analysts and investors will be held at 8.30am today. A presentation on Operational Excellence will be held at 4.00pm today for thefinancial community. A live webcast of the event and presentation slides will beavailable on www.amec.com. Enquiries to:AMEC plc: + 44 (0)20 7539 5800Samir Brikho, Chief ExecutiveStuart Siddall, Finance DirectorSue Scholes, Director of CommunicationsNeil Jamieson, Director of Investor RelationsMedia:Frank Stokes, Media Relations Manager TRADING UPDATE End markets in the energy, power and process industry sectors remain strong. Trading in each of the group's continuing businesses has continued to be strongsince the announcement of AMEC's interim results. The board expects 2007 pre-taxprofit for continuing operations, before intangible amortisation and pre-taxexceptional profits, to be towards the upper end of market expectations#. # Range between £111-122 million. Outlook 2008 End markets are expected to continue to be strong. Incremental net cost savings of at least £33 million from the STEP Change programme support the board's confidence that AMEC will achieve its six per cent EBITA margin* targetin 2008. * Profit for continuing operations before net financing costs/income,exceptional items, intangible amortisation and joint venture tax, but includingjoint venture profit before tax, as a percentage of revenues. Segmental performance Natural Resources Natural Resources has seen strong growth in each of its principal areas ofactivity in oil and gas services, oil sands (including infrastructure), andminerals and metals mining. EBITA margin for 2007 is expected to comfortablyexceed the 2008 target range of 7-8 per cent originally set in December 2006. The Natural Resources order book at the end October 2007 was £1.1 billion, (30June 2007 £1.1 billion). Given the strength of margin performance in Natural Resources in 2007 and theoutlook for 2008, a revised target range of 9-10 per cent has been set for 2008. Power and Process This division has also seen strong growth during 2007, reflecting ramp-up ofmajor contracts in the UK and higher levels of activity in North America. As aresult of the continued strength in trading, the business has increased itsminimum gross margin on all new contracts to nine per cent from eight per cent.Despite increased selectivity throughout the year, the order book in Power andProcess at the end October 2007 was unchanged on the position at 30 June 2007,standing at £1.3 billion. AMEC remains committed to the development of its wind energy portfolio, where itis seeking consents for projects with an overall capacity of over 1,000Mw,despite planning approval for the small Clashindarroch wind development havingbeen declined in September 2007. Power and Process EBITA margin in 2006 before costs of the Wind Energy businesswas 2.9 per cent. The margin in 2007, before Wind Energy and one-off costs ofSTEP Change, is expected to improve by c. 40 per cent. The board is confidentthat performance in 2008 will be comfortably within the revised range of 5-6 percent (original target range for 2008 5-7 per cent). Earth and Environmental Good growth in profit has continued despite weakness of the US dollar. EBITAmargin in 2007 is expected to be within the 6-8 per cent range originallytargeted for 2008. As a result, the margin target range for Earth andEnvironmental in 2008 is increased to 8-9 per cent. Investments and other activities Performance for 2007 will be close to break-even as the range of activities inthis division is reduced. Corporate costs Corporate costs for 2007, including increased charges in relation to share basedpayments of £6 million and £6 million one-off costs of STEP Change, are expectedto be c.£35 million. Operational Excellence programme AMEC is proceeding with "Operational Excellence", a 2-3 year programme designedto radically improve operating performance. Operational Excellence will be amajor contributor to AMEC delivering its target EBITA margin of eight per centby 2010 and will provide the basis for continuous improvement thereafter. Target margins for 2008 and 2010 for each of the core divisions are summarisedbelow. Group margin targets of six per cent in 2008 and eight per cent in 2010are unchanged. EBITA margin* target range --------------- --------------- 2008 (revised) 2010 --------------- ---------------Natural Resources 9 - 10% 10 - 11%Power and Process 5 - 6% 6 - 7%Earth and Environmental 8 - 9% 9 - 10% --------------- ---------------Group margin target 6%** 8%** * Profit for continuing operations before corporate and net financing costs/income, exceptional items, intangible amortisation and joint venture tax, butincluding joint venture profit before tax, as a percentage of revenues. ** EBITA margin after corporate costs. Further details of the Operational Excellence programme will be given in apresentation later today, 13 December 2007. A live webcast of the event andpresentation slides will be available on www.amec.com. Settlement of legacy issues AMEC continues to make good progress with its strategy of settlement of disputeswhere reasonable to do so. The board expects a further pre-tax net release of exceptional provisions of notless than £5 million in the second half of 2007. This is in addition to the £8million net pre-tax release made in the first half of the year. Exceptional gain on business disposals The aggregate post-tax exceptional gain arising on the divestment of BuiltEnvironment businesses in the second half of 2007 is expected to be not lessthan £210 million. With the divestment of peripheral businesses generating anaggregate post-tax gain of £9.7 million in the first half, the total gain fromdivestment of non-core businesses in 2007 is expected to be not less than £220million. Net proceeds from the divestment programme are expected to be c.£330million. Net cash Net cash at 31 December 2007 is expected to be c.£650 million. Average weeklynet cash for 2007 is expected to be c.£430 million, rising to at least £530million, before acquisitions and share buybacks, in 2008. Net financing income/pensions In 2008, net financing income will benefit from the expected increase in averagenet cash for the year. This improvement will be largely offset by a reduction ininvestment income arising on the assets in the group's principal UK pensionscheme following a change in investment policy. Tax rate Based upon a review of the group's tax position following the divestment ofBuilt Environment businesses, the tax rate for 2007 for the continuingbusinesses, before exceptional items and intangible amortisation and includingjoint venture tax, was estimated to be c.29 per cent. Taking into account thefurther benefit of previously unrecognised tax losses, the rate is likely tofall to c.25 per cent. For 2008, the underlying tax rate is expected to be c.35 per cent, but reliefarising from previously unrecognised tax losses is expected to reduce thischarge to c.29 per cent. Issued share capital As at 30 November 2007, AMEC had a total of 333,900,034 ordinary shares withvoting rights. In addition 3,518,800 shares were held in treasury. Sector classification On 12 December 2007, FTSE confirmed that AMEC will be reclassified to the OilEquipment and Services sector with effect from 24 December 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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