3rd Jul 2008 07:00
AMEC plc
3 July 2008
AMEC plc INTERIM PRE-CLOSE TRADING UPDATE
Chief Executive Samir Brikho said:
"AMEC continues to make excellent progress. With both our end markets and trading performance remaining strong, our level of confidence in the outturn for this year is increased and we have raised our margin expectation for 2008 to 6.5 per cent.
"In current markets, our net cash position is an increasingly valuable asset. It will allow us to continue to make selective acquisitions that will enhance our market position by strengthening our capability and geographic presence."
AMEC will announce interim results for the six months ending 30 June 2008 on Thursday, 28 August 2008.
Conference call
A telephone conference call for analysts and investors will be held at 8.30am today.
Forward looking statements
Any forward looking statements made in this document represent management's best judgement as to what may occur in the future. However, the group's actual results for the current and future fiscal periods and corporate developments will depend on a number of economic, competitive and other factors, some of which will be outside the control of the group. Such factors could cause the group's actual results for future periods to differ materially from those expressed in any forward looking statements made in this document.
INTERIM PRE-CLOSE TRADING UPDATE
As previously disclosed on 14 May 2008 in the group's Interim Management Statement, AMEC's end markets in the energy, power and process industry sectors and trading in each of the three core divisions remain strong.
At a capital markets seminar held on 5 June 2008, the Power and Process division announced that as a result of performance improvements, it expects to deliver an EBITA margin of c.6 per cent in 2008, up from the previously disclosed target range of 5-6 per cent.
Outlook
The continuing strength in AMEC's end markets, strong trading in Natural Resources and Earth and Environmental, together with improved performance in the Power and Process division, give the board increased confidence in the outturn for 2008. The expected EBITA margin for 2008 is increased to 6.5 per cent, up from the target figure of 6.0 per cent announced in December 2006.
The group's Operational Excellence programme is well underway and is already producing promising results. The programme will be a major contributor to AMEC achieving its target margin of eight per cent in 2010.
Acquisitions
Since 11 March 2008, AMEC has announced four acquisitions with an aggregate cash consideration of £110 million. Approximately £80 million of this will be paid in the current year, with the balance to be paid in future years.
Natural Resources
Earth and Environmental
Operational Excellence
The Operational Excellence programme is proceeding as planned. Implementation of all 12 focus areas is well underway and the programme is already producing first results.
As previously disclosed, Operational Excellence is expected to incur costs of up to £10 million during 2008. Further costs are expected in 2009.
Segmental performance
Natural Resources
Natural Resources end markets remain buoyant.
In Oil and Gas Services, North Sea operations continue the shift towards higher value-added activities. Operations in the Americas remain strong, whilst frontier regions continue to benefit both from new contract awards and contract renewals. On 3 June 2008, BP International Limited announced that AMEC had been selected as one of three companies to provide long-term engineering and project management services for BP's offshore developments around the world. The agreement underscores AMEC's leading position in engineering and project management services in the oil and gas industry, together with its ability to support customers worldwide.
The Canadian oil sands market remains particularly buoyant, with all areas of AMEC's activities seeing continued strong performance. The acquisition of Bower Damberger Rolseth (BDR) has strengthened AMEC's market position in the oil sands. BDR has particular expertise in thermal recovery of in-situ oil through Steam Assisted Gravity-Drainage (SAG-D) methods. By combining AMEC's leading position in the surface mining segment and BDR's strong reputation in in-situ extraction, the business is well positioned to compete across all oil sands segments.
The Minerals and Metals Mining business has also had a strong start to the year, with ramping up of projects in South America and continued high levels of activity in Canada. The latest major contract for this division was announced on 20 June 2008, with the award of a Cdn$150 million engineering, procurement and construction management contract by Baffinland Iron Mines Corporation for the Cdn$4 billion Mary River Iron Ore project on Baffin Island, Canada. The contract is scheduled to run until 2014.
The year to date average number of employees* in Natural Resources stands at 10,500, up eight per cent on the comparable figure at 31 December 2007.
The Natural Resources order book at the end of May was £1.30 billion, eight per cent higher than 31 December 2007 (£1.21 billion).
The division is expected to deliver an EBITA margin at the upper end of the 9-10 per cent targeted for 2008 and is on track to deliver the 10-11 per cent targeted in 2010.
Power and Process
Power and Process end markets remain strong, enabling this division to be increasingly selective in new work taken on. At a capital markets seminar held on 5 June 2008, the division announced an increase in the minimum gross margin on new contracts to 10 per cent, up from nine per cent.
* Full time equivalents, including agency staff
At the same event, the division announced that it expects to deliver an EBITA margin of c.6 per cent in 2008. This improved performance reflects the higher gross margin on new contracts, together with delivery of improved margin on the pre-existing backlog. As previously disclosed, Power and Process is on course to deliver the 6-7 per cent targeted for 2010. Given the strength of its margin improvement, the division will now consider capacity and geographic expansion through selective acquisitions.
The year to date average number of employees* in Power and Process stands at 7,400, up 10 per cent on the comparable figure at 31 December 2007.
The Power and Process order book stood at £1.11 billion at the end of May 2008 (31 December 2007 £1.36 billion).
Earth and Environmental
Earth and Environmental end markets continue to be generally strong, with the division expected to make further progress in 2008.
As previously disclosed, private sector consulting remains strong, being partly offset by weaker overseas federal spending by the US Government.
On 4 June 2008, Earth and Environmental announced the acquisition of Geomatrix, a diversified technical consulting and engineering firm headquartered in Oakland, California. The company employs some 500 engineers, scientists and other professionals in 18 offices across the US and one office in Canada. Excluding Geomatrix, the year to date average number of employees* in Earth and Environmental was 3,450, down four per cent on the comparable figure at 31 December 2007, with the decrease reflecting the normal seasonal pattern of business.
The division is expected to achieve its EBITA margin target of 8-9 per cent in 2008 and is on course to deliver the 9-10 per cent targeted for 2010.
Net cash
Expected average weekly net cash for 2008 is expected to exceed £600 million. This figure is after taking account of first half acquisitions with an aggregate cash cost of £110 million (up to £80 million outflow in 2008), together with share buy backs announced in the year to date.
Board changes
On 2 July 2008, AMEC announced the appointment of Ian McHoul as Chief Financial Officer. Previously Group Finance Director of Scottish and Newcastle plc, he will join AMEC on 8 September 2008.
* Full time equivalents, including agency staff
Enquiries to:
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AMEC plc: |
+ 44 (0)20 7539 5800 |
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Samir Brikho, Chief Executive |
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Grant Ling, Interim Finance Director |
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Sue Scholes, Director of Communications |
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Neil Jamieson, Director of Investor Relations |
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Media: |
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Kevin Byram, Brunswick Group LLC |
+ 44 (0)20 7404 5959 |
Notes to Editors:
AMEC plc
AMEC is a focused supplier of high-value consultancy, engineering, and project management services to the world's energy, power and process industries. With annual revenues of over £2.3 billion, AMEC designs, delivers and maintains strategic and complex assets for its customers. AMEC's Natural Resources, Power and Process and Earth and Environmental businesses employ over 23,000 people* in more than 30 countries globally. AMEC shares are traded on the London Stock Exchange where the company is listed in the Oil Equipment and Services sector (LSE: AMEC.L). www.amec.com
* Full time equivalents, including agency staff
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