24th Nov 2005 07:02
AMEC PLC24 November 2005 Reshaping for growth - proposed disposal of AMEC SPIE The Board of AMEC plc today announces that it is initiating a sale process ofAMEC SPIE. This follows the completion of the first stage of an ongoing reviewof AMEC's options for maximising long-term growth. Highlights • Proposed sale of AMEC SPIE, anticipated at a significant premium to book value • Review of future development of continuing businesses including, inter alia, possible future restructuring to create two separate businesses focused on energy and process industries and UK infrastructure respectively • Return of surplus capital from the sale of AMEC SPIE, subject to establishing suitable capital structures for each of the resultant businesses • Withdrawal from certain construction activities, with provision for closure and litigation costs - a post-tax exceptional charge of approximately £70 million in 2005, mainly non-cash items • Board confirms that overall trading before exceptional items in 2005, and the outlook for 2006, remain unchanged Sir Peter Mason, Chief Executive, said:"AMEC has grown three substantial businesses, which increasingly representdifferent investment propositions. Today, the scale of new opportunity in someend-markets - such as oil and gas, PPP and investment in the AMEC SPIE branchnetwork - has made it increasingly clear that we do not have the resources tofully exploit the prospects in all three of our businesses and still achieve thegrowth and returns we want. The proposed sale of AMEC SPIE will strengthen AMEC's balance sheet, givinggreater operational and financial flexibility, to leave a simplified group, morefocused on its customers, people and wider stakeholders. Beyond that, we mustlook at the future shape of our business to determine the right way forward." AMEC will host a telephone conference call for analysts and investors at 08.30 this morning, 24 November 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 Communications NotesAMEC plc is an international project management and services company thatdesigns, delivers and supports infrastructure assets for customers worldwideacross the public and private sectors. AMEC employs 45,000 people in more than40 countries, generating annual revenues of around £5 billion. AMEC's sharesare traded on the London Stock Exchange where the company is listed in theSupport Services sector (LSE: AMEC.L). Strategy AMEC has built three substantial businesses, which our review has shownincreasingly represent different investment propositions. This was recognised inthe re-presentation of AMEC into three business segments in December 2004. Today, these activities all present considerable, but different opportunities.As currently structured, AMEC does not have the resources to take full advantageof all of these. For this reason, AMEC has taken the decision to initiate a saleprocess of AMEC SPIE, to allow it to participate in the acceleratingconsolidation in its sector and to release resources to promote growth in AMEC'sremaining services and investments activities. The ongoing business review is evaluating options for the remaining businesseswithin AMEC to assess how best to deliver maximum value for shareholders. Thereview will include, inter alia, the possible separation of AMEC into twobusinesses, one focused on energy and process industries, and one which wouldinvest in, develop and deliver UK infrastructure, including PPP projects,property and wind developments. The review is also considering a return ofsurplus cash to shareholders following the proposed sale of AMEC SPIE, subjectto establishing suitable capital structures for each of the resultant businesses. The Board believes that the proposed sale of AMEC SPIE, in addition to providinggreater operational and financial flexibility, will leave a simplified group,more focused on its customers, people and wider stakeholders. Proposed sale of AMEC SPIE The Board is initiating a sale process for AMEC SPIE, which includes ContinentalEuropean Oil and Gas, Rail and Multitechnical Services activities in electricaland mechanical engineering, communications and nuclear. These activitiesgenerated total revenues of over £2 billion in 2004, the largest component ofwhich was Multitechnical Services, with sales of £1.3 billion and pre-taxprofits of £47 million. AMEC made its original investment in AMEC SPIE in 1997 and acquired full controlin 2003. Over the past eight years, AMEC SPIE has grown to become one of theleading providers of multitechnical services in Continental Europe, operatingfrom a network of over 300 locations in France, Benelux, Portugal and Spain. AMEC SPIE's local services business model provides services across an extensivebranch network for a large and diverse client base, with a relatively smallaverage contract value. AMEC SPIE's market place is highly fragmented and this has facilitated thegrowth of the business both through the acquisition of additional points in thenetwork and the building of services capabilities. While AMEC SPIE has been a key player in the gradual consolidation of itsindustry to date, the Board considers that this process is accelerating and thatAMEC SPIE's participation will be restricted while it remains part of the AMECgroup, to the potential detriment of future shareholder value. AMEC has added considerable value to AMEC SPIE during its ownership and expectsthat proceeds from the proposed disposal would significantly exceed book value,resulting in an exceptional credit in AMEC's 2006 accounts. As at 30 June 2005 AMEC SPIE businesses had a book value of £280 million. Restructuring, litigation and trading update The Board confirms that overall trading before exceptional items for 2005 andthe outlook for further progress in 2006 remain in line with its earlierexpectations. AMEC will, as usual, be providing the market with a trading update before going into closed period ahead of its preliminary results. This will be announced on 12 January 2006. In advance of the proposed disposal, and as part of the ongoing business review,the Board has decided that AMEC will withdraw from certain construction marketsin the UK and US. The UK Construction Services business will exit road building on a lump-sumbasis and certain building/refurbishment activities in the UK, which have beenloss-making for the last two years. All ongoing contracts in these areas arenearing completion. The UK Construction Services business is being refocused toconcentrate on design and build activities in the education, healthcare andinfrastructure sectors for PPP clients, together with design and build insectors including defence, rail, airport and industrial. In the US, AMEC has decided to exit its road building activities. AMEC's otherbusinesses in North America in the Oil and Gas and Engineering and TechnicalServices sectors, which generate annual revenues of approximately £700 million,are unaffected by these changes. These UK and US contracting activities too often lead to contractual disputesand therefore uncertain financial outcome. The post-tax cost of exiting theseactivities is expected to be approximately £30 million. As previously reported, the Oil and Gas business is no longer pursuing lump-sumfabrication projects in upstream and certain other areas. As a result of thisand delays in the settlement of final accounts on several major projects, theBoard believes that it is prudent to make a post-tax provision of approximately£15 million. AMEC's exit from the lump-sum construction activities above will further reducerisk whilst improving the quality of earnings. AMEC announced in May 2004 that it was to exit the US Construction Managementmarket. Actions to close the US Construction Management business are now welladvanced. AMEC continues to be involved in protracted litigation in respect ofcertain US Construction Management contracts, some of which date back a decade.In view of the slow progress in resolution of these disputes and following areview of the costs of exiting this business, AMEC is making a post-taxprovision of approximately £25 million. The overall exceptional charge in 2005 will be approximately £70 million aftertax, the vast majority of which will be non-cash items. Timing Subject to shareholder approval and necessary legal and regulatory consents,completion of the proposed disposal of AMEC SPIE is anticipated during thespring of 2006. A further more detailed announcement will be made in due course. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AMFW.L