25th Jun 2007 07:02
AMEC PLC25 June 2007 INTERIM PRE-CLOSE TRADING UPDATE • Trading in core businesses continues to be strong, particularly in Natural Resources • STEP Change 85% complete; 2007 benefits higher than costs • The board has increased its overall expectations for 2007 by £10 million; 2008 remains unchanged • Jormag and Thelwall Viaduct disputes settled; further progress with legacy issues expected • Average net cash in 2007 expected to exceed £300 million* • Divestment of remaining non-core businesses is in the final round * Average net cash will rise upon divestment of Built Environment businesses. Chief Executive, Samir Brikho, said: "I am pleased to report that trading in our core energy and process businessescontinues to be strong and that we are now benefiting from our STEP Changeprogramme earlier than planned. Our overall expectations for 2007 are increasedby £10 million. We are making good progress in the divestment of our non-core businesses andsettlement of legacy issues, our balance sheet is strong, and with average netcash of over £300 million, AMEC is very well placed for the next phase of itsdevelopment." AMEC expects to announce interim results for the six months ending 30 June 2007,on Thursday 6 September 2007. A telephone conference call for analysts and investors will be held at 8.30amtoday. STRATEGIC RESTRUCTURING STEP Change In October 2006, AMEC launched "STEP Change", a programme of change in thestructure and culture of the company, which has substantial cost savingstargets. In May 2007, AMEC announced that STEP Change savings were expected at least toequal one-off costs in 2007, with recurring net benefits of £35 million in thecontinuing businesses expected from 2008 onwards. STEP Change is approachingits conclusion, with over 85% of all actions in the group completed and 100%completion in the Natural Resources division. Finalisation of the groupprogramme is expected before 31 October 2007. STEP Change is now expected todeliver net benefits in 2007, however, in the first half of the year, one-offcosts of up to £10 million will exceed savings, as previously disclosed. The board remains confident that margin targets in the continuing businesses of6% in 2008 and 8% in 2010 will be achieved. Divestment of non-core businesses In December 2006, AMEC announced that its non-core businesses would be divestedduring 2007 consistent with optimising value. This programme of divestments isnow well advanced. On 4 June 2007, AMEC and Morgan Sindall plc announced that they had agreed termsfor the divestment of the Property Developments and UK Building and CivilEngineering businesses for a premium of £55 million to aggregate net assets asat 30 April 2007, resulting in an expected total net cash consideration ofapproximately £26 million. The transaction is subject to approval by MorganSindall shareholders and is expected to complete in late July. Five specialist non-core businesses have now been sold: • AMEC SPIE Rail - completed in April 2007 • Buchan Concrete Solutions - completed in April 2007 • Dynamic Structures - completed in April 2007 • AMEC SPIE Capag - completed in May 2007 • Midwest Pipelines - announced in June 2007 Aggregate net proceeds from these specialist business disposals* total £25million, resulting in an exceptional gain of at least £10 million. Several smallspecialist businesses are yet to be sold. The divestment process for the remaining two Built Environment businesses,Building and Facilities Services and the PPP business, is in the final round. *Excluding Midwest Pipelines, which has yet to be completed Basis of reporting and discontinued activities 2007 As previously disclosed, most Built Environment businesses, together withpipeline construction activities, will be treated as discontinued operations inthe 2007 accounts. These businesses performed in line with the board'sexpectations during the first half of 2007. As a result of this change in accounting treatment and minor businessrestructuring, segmental results for the six months ended 30 June 2006 and theyear ended 31 December 2006 are restated at the end of this announcement. Settlement of litigation and other issues AMEC is making substantial progress with its strategy of settlement of disputeswhere reasonable to do so. Settlement has now been reached on the Jordan Magnesia Company Ltd. ("Jormag")and Thelwall Viaduct disputes within the provisions made in 2006 or earlier.The board expects to report further progress in the next few months and remainsconfident that provisions are adequate to meet expected settlement costs. AVERAGE NET CASH Average net cash for 2007 (excluding proceeds from sale of the two remainingBuilt Environment businesses) is now expected to exceed £300 million and willrise upon completion of the divestment of Built Environment businesses. OUTLOOK Current trading remains strong, particularly in Natural Resources, and STEPChange is now expected to deliver net benefits in 2007. The board's overall expectations for 2007 are increased by £10 million; 2008remains unchanged. RESTATEMENT OF 2006 RESULTS The decision to divest non-core Built Environment businesses was announced on 13December 2006. As the disposal process is now well underway, the BuiltEnvironment businesses, along with certain specialist activities which are alsosubject to a disposal process, are now reported as discontinued and the 2006results have been restated on this basis. Changes in reported segmental results for 2006 arise from the following: (a) Treatment of Built Environment businesses as discontinued. (b) Revised basis of recharging central and corporate costs to core businessesfollowing expected divestments and the STEP Change programme. (c) Minor restructuring between the Earth and Environmental and Power andProcess divisions and the inclusion in Power and Process of ongoing activitiesin Wind. The Wind business made losses of £4 million in the year ended 31December 2006 reflecting costs of progressing its portfolio of wind energydevelopments. (d) A new segment "Investments and other activities" is established to includepast activities in Rail and Hong Kong, together with other ongoing activities inKorea and support services in the UK (previously in Power and Process). Profitsin this segment will decline significantly in 2007 as activities in Rail havebeen sold and Hong Kong is substantially reduced. Enquiries to:AMEC plc: + 44 (0)20 7634 0000 Analysts and investors:Samir Brikho, Chief ExecutiveStuart Siddall, Finance DirectorNeil Jamieson, Director of Investor Relations Media:Charles Reynolds, Head of Media Relations RESTATEMENT OF 2006 RESULTS Year ended 31 December 2006£ million Profit/(loss) before net financing costs* Revenue Margin 31 Dec 31 Dec 31 Dec 2006 Restated 2006 Restated 2006 Restated Natural Resources 920.9 920.9 55.0 59.1 6.0%# 6.4%#Power and Process 817.4 797.8 30.4 18.5 3.7% 2.3%Earth and Environmental 281.7 304.4 15.2 17.7 5.4% 5.8%Investments and other activities - 122.6 - 12.8 - 10.4%Energy and Process 2,020.0 2,145.7 100.6 108.1 Construction 1,150.8 - (27.8) -Investments 82.5 - 21.3 -Built Environment 1,233.3 - (6.5) - 3,253.3 2,145.7 94.1 108.1 Internal revenue (24.1) (24.1)Corporate costs (20.2) (21.4) 3,229.2 2,121.6 73.9 86.7 2.4%## 4.3%## Interest - - (4.2) (7.0)Profit before taxation 69.7 79.7** JV tax - - (5.0) (0.3)Intangible amortisation - - (3.6) (3.6)Reported profit before taxation and 3,229.2 2,121.6 61.1 75.8exceptionals Taxation (14.9) (22.5)Profit for the year from continuing 46.2 53.3operationsProfit for the year from discontinued 7.6 0.5operationsProfit for the year 53.8 53.8 * Before exceptional items ** In the preliminary results announcement, March 2007, group proforma profitbefore tax excluding all Built Environment operations was £81.3 million. Therestated figures reflect certain Built Environment businesses that are retainedby AMEC and the equivalent profit before tax figure is £79.7 million. # Excluding Oil and Gas lump-sum fabrication, margin for Natural Resourcesin 2006 rises from 6.7% to 7.2% ## Excluding Oil and Gas lump-sum fabrication, now closed Six months ended 30 June 2006£ million Profit/(loss) before net financing costs* Revenue 30 Jun 30 Jun 2006 Restated 2006 Restated Natural Resources 452.1 452.1 26.0 26.7Power and Process 474.7 366.0 15.6 10.1Earth and Environmental 141.5 151.6 6.3 6.7Investments and other activities - 59.5 - (2.2)Energy and Process 1,068.3 1,029.2 47.9 41.3 Construction 577.6 - (20.1) -Investments 49.4 - 16.8 -Built Environment 627.0 - (3.3) - 1,695.3 1,029.2 44.6 41.3 Internal revenue (19.9) (19.9)Corporate costs - - (10.4) (10.3) 1,675.4 1,009.3 34.2 31.0 Interest - - (8.1) (9.4)JV tax - - (1.9) (0.4)Intangible amortisation - - (2.8) (2.8)Reported profit before taxation ande 1,675.4 1,009.3 21.4 18.4exceptionals Taxation (6.2) (6.1)Profit for the period from continuing 15.2 12.3operationsProfit for the period from 8.4 11.3discontinued operationsProfit for the period 23.6 23.6 * Before exceptional items Reconciliation of changes to segmental results RevenueYear ended 31 December 2006£ million (a) (c) Reclassify Transfer Built Infrastructure Environ-ment and Wind to businesses 31 Dec 2006 discontinued Restated Natural Resources 920.9 - - 920.9 Power and Process 817.4 - (19.6) 797.8 Earth and Environmental 281.7 - 22.7 304.4 Investments and other - 125.7 (3.1) 122.6activities Energy and Process 2,020.0 125.7 - 2,145.7 Construction 1,150.8 (1,150.8) - - Investments 82.5 (82.5) - - Built Environment 1,233.3 (1,233.3) - - 3,253.3 (1,107.6) - 2,145.7 Internal revenue (24.1) - - (24.1) 3,229.2 (1,107.6) - 2,212.6 RevenueSix months ended 30 June 2006£ million (a) (c) Reclassify Built Environment and Transfer pipelines Infrastructure 30 Jun construction to and Wind 2006 discontinued businesses Restated Natural Resources 452.1 - - 452.1 Power and Process 474.7 (101.1) (7.6) 366.0 Earth and Environmental 141.5 - 10.1 151.6 Investments and other - 62.0 (2.5) 59.5activities Energy and Process 1,068.3 (39.1) - 1,029.2 Construction 577.6 (577.6) - - Investments 49.4 (49.4) - - Built Environment 627.0 (627.0 - - 1,695.3 (666.1) - 1,029.2 Internal revenue (19.9) - - (19.9) 1,675.4 (666.1) - 1,009.3 Reconciliation of changes to segmental results Profit/(loss) before tax*Year ended 31 December 2006£ million (a) (c) (d) Built Transfer Environment to (b) Infrastructure Support be 31 Dec Corporate and Wind services and discontinued 2006 costs businesses logistics Restated Natural Resources 55.0 1.9 - 2.2 - 59.1 Power and Process 30.4 (0.1) (5.5) (6.3) - 18.5 Earth and Environmental 15.2 1.3 1.2 - - 17.7 Investments and other - - 4.3 4.1 4.4 12.8activities Energy and Process 100.6 3.1 - - 4.4 108.1 Construction (27.8) (1.7) - - 29.5 - Investments 21.3 (0.2) - - (21.1) - Built Environment (6.5) (1.9) - - 8.4 - 94.1 1.2 - - 12.8 108.1 Corporate costs (20.2) (1.2) - - - (21.4) 73.9 - - - 12.8 86.7 Interest (4.2) - - - (2.8) (7.0) Joint venture tax (5.0) - - - 4.7 (0.3) Intangible amortisation (3.6) - - - - (3.6) Profit before tax 61.1 - - - 14.7 75.8 Taxation (14.9) - - - (7.6) (22.5)Profit for the year from 46.2 - - - 7.1 53.3continuing operationsProfit for the year from 7.6 - - - (7.1) 0.5discontinued operationsProfit for the year 53.8 - - - - 53.8 * Before exceptional items Profit/(loss) before tax*Six months ended 30 June 2006£ million (a) Built (c) Environment and Transfer (d) pipelines (b) Infrastructure Support construction 30 Jun Corporate and Wind services and to be 2006 costs businesses logistics discontinued Restated Natural Resources 26.0 (0.3) - 1.0 - 26.7 Power and Process 15.6 (1.0) (1.4) (2.4) (0.7) 10.1 Earth and Environmental 6.3 0.9 (0.5) - - 6.7 Investments and other - - 1.9 1.4 (5.5) (2.2)activities Energy and Process 47.9 (0.4) - - (6.2) 41.3 Construction (20.1) 0.4 - - 19.7 - Investments 16.8 (0.1) - - (16.7) - Built Environment (3.3) 0.3 - - 3.0 - 44.6 (0.1) - - (3.2) 41.3 Corporate costs (10.4) 0.1 - - - (10.3) 34.2 - - - (3.2) 31.0 Interest (8.1) - - - (1.3) (9.4) Joint venture tax (1.9) - - - 1.5 (0.4) Intangible amortisation (2.8) - - - - (2.8) Profit before tax 21.4 - - - (3.0) 18.4 Taxation (6.2) - - - 0.1 (6.1)Profit for the period 15.2 - - - (2.9) 12.3from continuingoperationsProfit for the period 8.4 - - - 2.9 11.3from discontinuedoperationsProfit for the period 23.6 - - - - 23.6 * Before exceptional items This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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