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Thursday 08 August, 2013

AMEC PLC

AMEC plc 2013 half-year results

RNS Number : 2187L
AMEC PLC
08 August 2013
 



 

AMEC plc 2013 half-year results

Trading in line with expectations

 

 

Highlights

·      Adjusted diluted EPS5 40.4 pence, up 16 per cent

o Revenue stable at £1,998 million

o EBITA1 £158 million, up 4 per cent

o Margin2 7.9 per cent, up 40 basis points

o Completed £400 million buyback in February 2013

·      Operating cash flow4 £56 million

o Continue to expect strong cash conversion for full year

·      Strong order intake and record order book

·      Interim dividend per share up 15 per cent, to 13.5 pence

 

 

Chief Executive Samir Brikho said:

                                                                  

"AMEC has started 2013 solidly, with stable revenues and improving margins in the first six months.

 

"Our record order book of £3.9 billion demonstrates how the geographic structure is creating new opportunities for us to grow and service our clients more broadly across our four markets. We continue to see good demand for our services, despite some challenging markets and this gives us confidence to reaffirm our outlook for this year's earnings.

 

"A 15 per cent increase in the interim dividend signals our belief in the underlying strength of AMEC and we continue to expect to achieve an EPS of greater than 100 pence in 2014."

 

 

Results presentation and live webcast: AMEC will host a presentation on the half-year results for analysts and investors at 9.00am today. A live webcast of the event and presentation slides will be available on amec.com

Next event: Interim Management Statement on 19 November 2013

Analyst consensus estimates are collated and published on AMEC's website on a periodic basis amec.com/investors/consensus_estimates

 

Enquiries to:

AMEC plc:

+ 44 (0)20 7429 7500

Samir Brikho, Chief Executive


Ian McHoul, Chief Financial Officer


Sue Scholes, Director of Communications


Rupert Green, Interim Head of Investor Relations




Media:


Brunswick Group LLP  - Mike Harrison and David Litterick

+ 44 (0)20 7404 5959

 

Page 1

Financial highlights

Group

 

Six months ended 30 June

 


2013

2012

Change (%)






Revenue

(£m)

1,998

2,026

-1%






EBITA1

(£m)

158

152

+4%






Adjusted profit before tax3

(£m)

154

151

+2%






Profit before tax

(£m)

117

120

-2%

 

Operating cash flow4

 

(£m)

 

56

 

142

 

-60%






Adjusted diluted earnings per share5

pence

40.4

34.8

+16%






Diluted earnings per share from continuing operations

 

pence

 

32.0

 

28.7

 

+11%






Dividend per share

pence

13.5

11.7

+15%

 

Notes:

1.     EBITA for continuing operations before intangible amortisation and exceptional items but including joint venture EBITA

2.     EBITA as defined above as a percentage of revenue

3.     EBITA, as defined above, less net financing costs (including joint ventures) of £4 million (H1 2012: £1 million)

4.     Cash generated from operations before exceptional items and discontinued operations, legacy settlements and the difference between pension payments and amounts recognised in the income statement but including dividends received from joint ventures

5.     Diluted earnings per share from continuing operations before intangible amortisation and exceptional items

 

Basis of presentation

The following commentary is based on the results for continuing operations before intangible amortisation and exceptional items but including joint venture EBITA.

 

The results are presented to the nearest million. Percentage movements and calculated numbers, such as EPS and margin rates, are based on the underlying numbers to 1 decimal place precision.

 

The comparative figures for 2012 have been restated as a result of the adoption of IAS 19(2011R) 'Employee Benefits'. The impact on the six months ended 30 June 2012 is a reduction in net financing income of £6 million and a reduction in the tax charge of £2 million, resulting in a reduction of £4 million in profit after tax. See note 2 for more details.

 

Segmental analysis

Segmental analysis is now provided for the group's activities in three geographic zones (Americas, Europe and Growth Regions), as well as for non-core Investment Services. 2012 half-year figures have been restated on this same basis.

 

Amounts and percentage movements relating to continuing segmental earnings before net financing income, tax and intangible amortisation (EBITA) are stated before corporate costs of £18 million (H1 2012: £18 million) and pre-tax exceptional costs of £14 million (H1 2012: £10 million).  

 

Discontinued operations

In accordance with IFRS 5*, the post-tax results of discontinued operations are disclosed separately in the consolidated income statement.

 

*International Financial Reporting Standard 5: 'Non-current assets held for sale and discontinued operations'.

 

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.

Page 2



H1 2013 results overview









Group


2013

Underlying ex. proc

Incremental procurement

Currency exchange

Acquisitions

2012

 

Six months ended 30 June

 

Revenue

(£m)

  1,998

9

(100)

           23

               40

2,026

 

     Y-on-Y change

(%)

(1)

nil

(4)

+1

+2


 

EBITA

(£m)

158

1

nil

2

3

152

 

     Y-on-Y change

(%)

+4

+1

nil

+1

+2


 

EBITA margin

(%)

      7.9





     7.5

 

     Y-on-Y change

(bps)

+40






 









 

Order book

(£bn)

3.9


3.7

 

     Y-on-Y change

(%)

+6






 

 

Revenue for the first six months of 2013 was stable at £1,998 million (H1 2012: £2,026 million). Underlying revenue, excluding incremental procurement, was also in line with last year. A strong performance in conventional oil & gas in particular was offset by continued weakness in Australia, softening in mining and the gradual phasing down of Imperial Oil's Kearl project in the Canadian oil sands.

 

EBITA increased 4 per cent to £158 million (H1 2012: £152 million) with EBITA margins up by 40 basis points to 7.9 per cent (H1 2012: 7.5 per cent). Margins benefited from the reduction in incremental procurement activities in the Americas and cost efficiencies relating to the business restructuring in October 2012, which were partially offset by weakness in Europe.

 

Adjusted profit before tax of £154 million in H1 2013 was 2 per cent ahead of the previous year (H1 2012: £151 million). After joint venture tax of £1 million (H1 2012: £2 million), amortisation of £22 million (H1 2012: £19 million) and exceptional losses of £14 million (H1 2012: £10 million), profit before tax was £117 million (H1 2012: £120 million). The tax charge for H1 2013, including tax on amortisation and exceptional items, was £22 million (H1 2012: £25 million) resulting in a total profit from continuing operations for H1 2013 of £95 million (H1 2012: £95 million).

 

Adjusted diluted earnings per sharefrom continuing operations were 40.4 pence (H1 2012: 34.8 pence).

 

Operating cash flow for the period was £56 million, down £86 million from the comparable period last year. This reduction is predominately due to short-term timing effects in working capital, and also reflects the unusually high cash flow in the first half of 2012. Full-year cash flow is expected to be strong once again, with cash conversion in line with recent years.

 

Balance sheet and use of cash

AMEC has a low-risk, asset-light business model and expects to generate substantial free cash flow each year. AMEC expects to maintain its progressive dividend policy, with periodic additional returns of surplus cash to shareholders when appropriate.

 

Acquisitions remain a key component of the company's growth strategy. The board is prepared to assume debt of up to 2x EBITDA for the right acquisition. The pipeline for acquisitions in 2013 remains strong.

Page 3

 

Moving to a more efficient balance sheet remains a key component of AMEC's strategy. The company completed a £400 million share buyback programme in February 2013.

 

Dividend

A 15 per cent increase in the interim dividend to 13.5 pence per share (H1 2012: 11.7 pence) demonstrates the board's continuing confidence in the group's future performance and is in line with AMEC's progressive dividend policy.

 

Average number of employees

The average number of employees was up 4 per cent in the first half, to 28,928.

 

Average number of employees

Six months ended 30 June

2013

2012

     Change (%)

 

Americas

14,762

14,566

+1

Europe

10,744

10,109

+6

Growth Regions

3,186

2,831

+13

Centre

236

 

227

+4

Group

28,928

27,733

+4

 

Outlook  

AMEC continues to see good demand for its services, despite some challenging markets and is identifying additional opportunities from the new geographic focus. Full year 2013 underlying revenue, excluding incremental procurement, is expected to be in line with 2012, with good visibility provided by the order book of £3.9 billion. Incremental procurement in 2013 is still expected to be £200 million lower than in 2012.

 

Second half margins are expected to be stronger than H1 2013, reflecting the usual seasonal uplift. Compared with the same period last year, they are also expected to benefit from the reduction in incremental procurement and from cost efficiencies relating to the business restructure.

 

Operating cash flow in the full year is expected to be strong.

 

The pipeline of acquisition opportunities remains strong. Depending on progress on acquisitions, additional cash returns to shareholders will be considered in the fourth quarter, consistent with the philosophy described previously.

 

AMEC continues to expect to achieve earnings per share of greater than 100 pence in 2014.

 

Page 4



 

Segmental review

AMEC announced a reorganisation into three geographic business units in October 2012. This reorganisation became effective on 1 January 2013.

 

For comparative purposes, restated half-year splits for 2010, 2011 and 2012 are appended to this announcement and provided in the supplementary information pack, available in the investor relations section of the AMEC website:  amec.com/investors.

 

Americas

Americas is the largest business unit, generating 57 per cent of group revenue in H1 2013. 

 

The portfolio of activities is well balanced across all four markets, with revenue broken down as follows:

 

Americas

Six months ended 30 June


2013

2012

Oil & Gas

(%)

37

38

Mining

(%)

19

22

Clean Energy

(%)

25

22

Environment & Infrastructure

(%)

19

18

 

Americas

Six months ended 30 June


2013

Underlying excl proc.

Incremental procurement

Currency exchange

Acquisitions

2012









Revenue

(£m)

   1,154

11

(100)

              22

                  3

1,218

     Y-on-Y change

(%)

(5)

+1

(8)

+2

nil


EBITA

(£m)

113

2

nil

2

(2)

111

     Y-on-Y change

(%)

+2

+2

nil

+2

(2)


EBITA margin

(%)

9.8





9.1

     Y-on-Y change

(bps)

+70






Order book

(£bn)

1.6





1.4

     Y-on-Y change

(%)

+8






 

Revenue in Americas was down 5 per cent to £1,154 million, while underlying revenue, excluding incremental procurement, was up 1 per cent compared with the same period last year. A strong performance in conventional oil & gas and a good performance in clean energy helped to offset weakness in oil sands and mining.

 

EBITA was up 2 per cent to £113 million (H1 2012: £111 million). The EBITA margin at 9.8 per cent was up 70 basis points from 2012, reflecting the reduction in incremental procurement.

 

Page 5

 

 

 

 

Contract wins in H1 2013 included:

 

Customer

Market

Description

   Country

Dominion

Clean Energy

EPC contract to design and construct the Azalea 7.7MW solar array in Georgia

US

BP

Multiple

Framework contract to provide environment and related consulting services for all of BP's assets in their upstream, refining and marketing, alternative energy and shipping businesses worldwide

Global

Dominion

Clean Energy

EPC contract to design and construct  three solar arrays in Indiana totalling 28.6MW

US

 

Since the period end, Sempra US Gas & Power has appointed AMEC to design and build the 'Copper Mountain III' EPC solar project in Nevada. Other projects currently underway include various mining consulting projects and a number of existing copper, gold and potash EPCM projects for Newmont, Thompson Creek, PotashCorp and K&S Potash, as well as on-going oil sands work for Imperial Oil, Syncrude, CNRL, Suncor, Shell and AMR among others, and the provision of environmental services in US shale gas. Oil & gas activity in the Gulf of Mexico continues with the delivery of the Marine Well Containment System scheduled for early 2014 and additional FEED work awarded to the BP Big Dog team.

 

Order intake in the first half of 2013 improved significantly compared with the same period in 2012, with oil & gas and clean energy activity driving the increase. The order book as at 30 June 2013 was £1.6 billion, up 8 per cent since the same period last year.

 

Americas outlook

First half revenue trends (underlying and excluding incremental procurement) are expected to continue into the second half. Incremental procurement is still expected to be £200 million lower in 2013 than in 2012.

 

Full-year margins are expected to improve compared with 2012, benefiting from lower levels of procurement and cost efficiencies from the restructure.

 

Page 6



 

Europe

Europe generated 30 per cent of group revenue in H1 2013. It has market leading positions in the UK North Sea and UK nuclear decommissioning and waste management markets

 

H1 revenue can be analysed by market as shown below:

Europe

Six months ended 30 June


2013

2012

Oil & Gas

(%)

67

59

Mining

(%)

nil

1

Clean Energy

(%)

29

37

Environment & Infrastructure

(%)

4

3

 

Europe

Six months ended 30 June


2013

Underlying business

Currency exchange

Net acquisitions

2012 

Revenue

(£m)

             596

              11

1

               29

       555

     Y-on-Y change

(%)

+7

+2

nil

+5


EBITA

(£m)

39

(10)

nil

5

44

     Y-on-Y change

(%)

(11)

(22)

nil

+11


EBITA margin

(%)

6.5




7.8

     Y-on-Y change

(bps)

(130)












Order book

(£bn)

1.6




1.7

     Y-on-Y change

(%)

(3)





 

Revenue in Europe was up 7 per cent to £596 million. The six-month impact of the ESRC nuclear business, acquired in June last year, was the primary driver, boosted by strong activity in the UK North Sea.

 

EBITA was down 11 per cent at £39 million with EBITA margin down 130 basis points to 6.5 per cent (H1 2012: 7.8 per cent). A strong performance in UK North Sea was offset by a one-off loss of £7 million arising from delays to the Teesside Gas Processing Plant (TGPP) contract, which led to a significant cost escalation. The contract is now largely complete. The Sellafield joint venture contributed £3 million (H1 2012: £7 million), the reduction reflecting lower realisation of performance-based payments.

 

Contract awards announced in H1 2013 reflect continued investment in the UK North Sea and the clean energy market.

 

Customer

Sector

Description

   Country

 

BP

O&G

3+ year contract to hook up and commission two new Clair Ridge platforms, worth £68 million

UK North Sea

BP

O&G

2-year renewal for maintenance and operations for BP Forties Pipeline System worth £10-15 million each year

UK North Sea

BG

O&G

2-year contract extension worth £110 million to continue to provide engineering, procurement, construction, commissioning and project management support for all of BG Group's facilities in the central North Sea

Page 7

UK North Sea

Xcite Energy

O&G

Memorandum of understanding to provide initial concept and pre-FEED services to develop the Bentley Field in the UK North Sea

UK North Sea

OMV

O&G

Engineering services framework upgrade of green and brownfield on and off shore facilities in JV with Comproiect-92

Romania

Magnox

Nuclear

Project management resource contract to support decommissioning at 10 sites in joint venture (VELA alliance) with Jacobs Engineering Group

Magnox sites, UK

AWE

Nuclear

Strategic partnership agreement to provide implementation services at Aldermaston

Berks, UK

UK Environment Agency

E&I

Framework contract to provide environmental impact assessments, site and risk assessments, remediation projects for the National Contaminated Land Consultancy

England & Wales

Scottish government

 

E&I

Specialist consultancy support to the 'resource efficiency Scotland' programme

Scotland

 

Other current projects include the detailed design for BP's Clair Ridge field and GDF Suez's Cygnus field, detailed engineering and procurement for ConocoPhillips' existing Judy platform and the hook-up and commissioning of the new Jasmine facilities in the North Sea, a five-year call-off contract to provide brownfield engineering for Talisman and the Shell ONEgas asset support contract in the Southern North Sea. Beyond oil & gas projects, on-going clean energy projects include reactor services support work for EDF's nuclear power stations in the UK.

 

The order book as at 30 June was £1.6 billion (30 June 2012: £1.7 billion).  The Sellafield decommissioning contract, as an equity accounted joint venture, is not included in these figures.

 

Europe outlook

Underlying revenue trends in the second half are expected to be similar to H1 2013.

Second half margins are expected to benefit from the usual seasonality and are not expected to be adversely impacted by the TGPP project. When compared to the second half in 2012, margins will benefit from the decline of activity in conventional power and cost efficiencies relating to the business restructure.

 

Page 8



 

Growth Regions

Growth Regions generated 13 per cent of group revenue in H1 2013, with oil & gas activities driving much of the activity. The medium-term goal is to establish a sustainable position in core countries within the Growth Regions, with a balanced portfolio across all four markets.

 

H1 revenues can be analysed by market as follows:

Growth Regions

Six months ended 30 June


2013

2012

 

Oil & Gas

(%)

66

61

 

Mining

(%)

11

22

 

Clean Energy

 

(%)

4

2

 

Environment & Infrastructure

(%)

19

15

 








Growth Regions


2013

Underlying business

Currency exchange

Acquisitions

2012

Six months ended 30 June

Revenue

(£m)

265

(5)

nil

8

262

 Y-on-Y change

(%)

+1

(2)

nil

+3


EBITA

(£m)

16

4

nil

nil

12

Y-on-Y change

(%)

+31

+31

nil

nil


EBITA margin

(%)

6.1




4.8

 Y-on-Y change

(bps)

+130












Order book

(£bn)

0.7

0.6

Y-on-Y change

(%)

+24





 

Revenue in the Growth Regions was stable at £265 million. A strong performance in the Middle East oil & gas market and the Unidel acquisition in May 2012 were offset by weakness in Australia, as previously flagged.

 

EBITA was up 31 per cent, to £16 million and the EBITA margin was 6.1 per cent, up 130 basis points from H1 2012. The margin improvement is largely the result of a strong performance in the oil & gas market and the impact of cost efficiencies following integration across the geography.

 

Contract awards in 2013 reflect the strength of the oil & gas market in the Middle East and Azerbaijan. In June, AMEC was awarded a four-year extension to its programme management consultancy services contract for ZADCO-Zakum Development Company in Abu Dhabi.

 

Other current projects include providing asset support for ConocoPhillips' Bayu Udan gas facilities in East Timor Sea, operational readiness services for Chevron's Wheatstone facility offshore Australia, and onshore turnaround and maintenance support to ENI's onshore gas treatment plant and offshore unmanned wellhead platform, also in Australia. In the Middle East, AMEC continues to provide support to the long-term PMC contract for KOC in Kuwait and the KNPC's new oil refinery at Al Zour.

 

The order book at 30 June 2013 was £0.7 billion, up 24 per cent.

 

Page 9

Growth Regions outlook

Revenue in 2013 is expected to be stable, with good performance in most regions but significant weakness in Australia where demand continues to be soft.  Full-year margins are expected to improve as a result of efficiencies from the integration of operations.

 

Investment Services

This comprises the Incheon Bridge PPP project in Korea and the Lancashire Waste PFI project, both now operational, the group's insurance captive, AMEC's residual wind development activities and a range of other non-core activities. Revenue was £2 million (H1 2012: £2 million). EBITA of £8 million (H1 2012: £3 million) is atypically high, reflecting the successful exit from assets in North America.

 

Management changes

Dr Hisham Mahmoud, President Growth Regions, has informed AMEC that he wishes to resign for personal reasons. The board wishes to thank him for all he has contributed during his time with the group. His successor will be announced in due course.

 

Financial review

Administrative expenses 

Administrative expenses of £114 million were in line with last year (H1 2012: £114 million), though 5 per cent lower if the impact of acquisitions is excluded.

 

Net financing costs

The net financing costs for the first half of £1 million included net bank interest of £nil (H1 2012: £2 million receivable), net interest on pensions assets of £nil (H1 2012: £1 million) and other items, primarily fees, of £1 million (H1 2012: £nil). AMEC's share of interest payable of equity accounted joint ventures was £3 million (H1 2012: £2 million).

 

Taxation

Continuing operations

The group's effective tax rate for the first six months of 2013 for the continuing businesses (including tax attributable to joint venture interests) before exceptional items and excluding intangible amortisation was 22.0 per cent (H1 2012: 23.5 per cent). The full year tax rate is expected to be approximately 23 per cent.

 

Deferred tax

As at 30 June 2013, the group had net deferred tax assets of £44 million (30 June 2012: £66 million, 31 December 2012: £33 million) arising from short-term timing differences relating to provisions, property, plant and equipment, and tax losses, offset by liabilities in respect of intangible assets and retirement benefits.

 

Financial position and net cash

The group remains in a strong financial position, with net cash as at 30 June 2013 of £25 million (30 June 2012: £290 million, 31 December 2012: £99 million) and committed facilities of £477 million, including a five-year multi-

 

Page 10

currency revolving facility plus a £100 million one-year term loan. AMEC completed a £400 million share buyback programme in February 2013.

Derivative financial instruments

As at 30 June 2013, there were derivative financial instruments with a net asset of £1 million (30 June 2012: net liability £10 million, 31 December 2012: net liability £3 million) on the balance sheet. This net asset represents the fair value of foreign exchange contracts used to hedge the cash flows of foreign currency contracts and cross currency instruments used to hedge the net investment in overseas subsidiaries.

Intangible amortisation

Intangible amortisation relates to capitalised software and intangible assets acquired as part of the group's expansion programme. The first half charge was £22 million (H1 2012: £19 million).

 

Going concern

The directors are satisfied that the group has adequate resources to operate for the foreseeable future. As at 30 June 2013, the group held net cash of £25 million and had committed banking facilities of £477 million. 

 

Exceptional items

Total pre-tax exceptional losses of £19 million (H1 2012: £1 million) included:

·      a loss on business disposals and closures of £11 million arising from adjustments to existing provisions made in respect of prior year disposals and closures

·      other exceptional costs of £8 million, which includes £7 million of restructuring costs associated with the management reorganisation into geographic business units.

 

Cash flow

Cash generated from operations in the first half of 2013 was £41 million (H1 2012: £130 million).  After adjusting for exceptional items and discontinued operations, legacy settlements and the difference between pension payments and amounts recognised in the income statement but including dividends received from joint ventures, operating cash flow was £56 million (H1 2012: £142 million). This reduction was predominately due to short-term timing effects in working capital, and also reflects the unusually high cash flow in the first half of 2012. Full-year cash flow is expected to be strong once again, with cash conversion in line with recent years.

 

Pensions 

The IAS 19 surplus of the principal UK pension schemes as at 30 June 2013 was £85 million (30 June 2012: £35 million, 31 December 2012: £86 million). The schemes have operated on a career average salary basis since 1 January 2008. During 2012 the principal UK pension scheme was closed to new entrants, but remains open to future accrual for existing members.

 

There are a number of smaller schemes which are in a deficit position. The combined deficit as at 30 June 2013 was £99 million (30 June 2012: £80 million, 31 December 2012: £93 million).

 

Legacy issues

There have been no significant contingent liabilities identified in the first half of 2013. 

 

Page 11

Provisions

Provisions held as at 30 June 2013 were £173 million (30 June 2012: £178 million, 31 December 2012: £171 million). During 2013, £12 million of the brought forward provisions were utilised, and as part of the ongoing review of the potential liabilities, an additional £17 million of provisions were created and £6 million released as no longer required.  

 

Provisions are analysed as follows:

 

As at 30 June 2013

£ million

 

Litigation provisions

 

40

Indemnities granted to buyers and retained obligations on disposed businesses

76

Insurance, onerous property contracts and provisions to fund joint ventures

57

 

Total

 

173

 

 

Business risks and opportunities

AMEC operates in some 40 countries globally, serving a broad range of markets and customers. As such, the group is subject to certain general and industry-specific risks. Where practicable, the group seeks to mitigate exposure to all forms of risk through effective risk management and risk transfer practices.

 

AMEC operates predominately in the UK and North America and is therefore particularly affected by political and economic conditions in those markets.

 

Changes in general economic conditions may influence customers' decisions on capital investment and/or asset maintenance, which could lead to volatility in the development of AMEC's order intake. These may also lead to change in the customer base, competition and in the way customers procure the services we provide.

 

AMEC seeks to maintain a balanced geographic presence, and, through acquisition and organic growth, will continue to increase its exposure to other attractive regions of the world.

 

The risks associated with economic conditions resulting in a downturn and affecting the demand for AMEC's services has been addressed, as far as practicable, by seeking to maintain a balanced business portfolio in terms of geographies, markets, clients and service offering / business model.

 

In light of continuing global economic uncertainties, steps have been taken to assess and monitor any potential impact on AMEC's business opportunities and address potential increased supply chain and, more broadly counter-party risk.

 

Other risks

Other than the specific risks detailed above, the board considers that the nature of the principal risks and uncertainties which may have a material effect on the group's performance in the second half of the year is unchanged from those identified on pages 22 and 23 of the 2012 annual report and accounts. These are a major

 

Page 12

third party environmental event, changes in commodity prices, restructure to focus on expansion of global footprint, mergers and acquisitions, project delivery, pensions, health, safety and security, legacy risk, information technology, staff recruitment and retention and ethical breach.

 

Restatement of historic results

Six months ended 30 June


2012


2011


2010

£million

Revenue

EBITA

Margin


Revenue

EBITA

Margin


Revenue

EBITA

Margin

Americas

1,218 

111 

9.1%


794 

83 

10.5%


829 

86 

10.4%

Europe

555 

44 

7.8%


493 

43 

8.7%


440 

31 

7.1%

Growth Regions

262 

12 

4.8%


207 

16 

7.8%


170 

13 

7.7%

Investment Services

2 

3 



(3)



(1)


Corporate costs

- 

(18)



(17)



(17)


Internal revenue

(11)



(13)



(11)

-



2,026 

152 

7.5%


1,484 

122 

8.2%


1,430 

112 

7.8%













Oil & Gas

955 




629 




681 



Mining

334 




219 




159 



Clean Energy

476 




440 




402 



Environment & Infrastructure

270 




206 




197 



Centre

(9)




(10)




(9)




2,026 

152

7.5%


1,484 

122

8.2%


1,430 

112

7.8%

 


Average employees


Order book (£bn)



2012

2011

2010


2012

2011

2010


Americas

14,566

12,144

10,841


1.43

1.35

1.22


Europe

10,109

9,007

7,947


1.67

1.47

1.67


Growth Regions

2,831

2,621

2,439


0.58

0.56

0.59


Centre

227

260

258


-

-

-



27,733

24,032

21,485


3.68

3.38

3.48


 

 

Page 13



 

CONDENSED CONSOLIDATED INCOME STATEMENT                                                  


Six months ended 30 June 2013


 



Before


Amortisation




 



amortisation


and




 



and


exceptional




 



exceptional


items




 



items


(note 4)



Total

 


Note

£ million


£ million



£ million

 

 








 

Continuing operations








 

 








 

Revenue

3

1,998 




1,998 

 

 








 

Cost of sales


(1,731)




(1,731)

 

 








 

Gross profit


267 




267 

 

 








 

Administrative expenses


(114)


(30)



(144)

 

 








 

Loss on business disposals and closures



(6)



(6)

 

 








 

Profit/(loss) before net financing costs


153 


(36)



117 

 

 








 

Financial income





 

Financial expense


(4)




(4)

 

 








 

Net financing costs


(1)




(1)

 

 








 

Share of post-tax results of joint ventures





 

 








 

Profit/(loss) before income tax

3

153 


(36)



117 

 

 








 

Income tax

5

(33)


11 



(22)

 

 








 

Profit/(loss) for the period from continuing








 

operations


120 


(25)



95 

 

 








 

Loss for the period from discontinued








 

operations

6


(4)



(4)

 

 








 

Profit/(loss) for the period


120 


(29)



91 

 

 








 

Attributable to:








 

Equity holders of the parent







92 

 

Non-controlling interests







(1)

 

 








 

 







91 

 

 








 

 








 

 








 

 








 

Basic earnings/(loss) per share:

7







 

Continuing operations


41.1p 





32.6p 

 

Discontinued operations






(1.4)p

 

 








 

 


41.1p 





31.2p 





(1.4)p

 








 

Diluted earnings/(loss) per share:

7







 

Continuing operations


40.4p 





32.0p 

 

Discontinued operations






(1.4)p

 

 








 

 


40.4p 





30.6p 

 

 

 

Page 14

 

CONDENSED CONSOLIDATED INCOME STATEMENT


Six months ended 30 June 2012


 



Before








amortisation


Amortisation






and


and






exceptional


exceptional






items


items



Total



(Restated)


(note 4)



(Restated)


Note

£ million


£ million



£ million

 








Continuing operations








 








Revenue

3

2,026 




2,026 

 








Cost of sales


(1,772)




(1,772)

 








Gross profit


254 




254 

 








Administrative expenses


(114)


(29)



(143)

 








Profit on business disposals and closures


-  




 








Profit/(loss) before net financing income


140 


(29)



111 

 








Financial income





Financial expense


(2)




(2)

 








Net financing income





 








Share of post-tax results of joint ventures





 








Profit/(loss) before income tax

3

149 


(29)



120 

 








Income tax

5

(34)




(25)

 








Profit/(loss) for the period from continuing








operations


115 


(20)



95 

 








Profit for the period from discontinued








operations

6




 








Profit/(loss) for the period


115 


(13)



102 

 








Attributable to:








Equity holders of the parent







102 

Non-controlling interests







 








 







102 

 








 








 








 








Basic earnings per share:

7







Continuing operations


35.4p 





29.3p 

Discontinued operations






2.1p 

 








 


35.4p 





31.4p 

 








Diluted earnings per share:

7







Continuing operations


34.8p 





28.7p 

Discontinued operations






2.1p 

 








 


34.8p 





30.8p 

 

Page 15

CONDENSED CONSOLIDATED INCOME STATEMENT


Year ended 31 December 2012


 



Before






 



amortisation


Amortisation




 



and


and




 



exceptional


exceptional




 



items


items



 



(Restated)


(note 4)



(Restated)


Note

£ million


£ million



£ million

 

 








 

Continuing operations








 

 








 

Revenue

3

4,158 




4,158 

 

 








 

Cost of sales


(3,626)




(3,626)

 

 








 

Gross profit


532 




532 

 

 








 

Administrative expenses


(225)


(68)



(293)

 

 








 

Profit on business disposals and closures





 

 








 

Profit/(loss) before net financing costs


307 


(68)



239 

 

 








 

Financial income





 

Financial expense


(8)




(8)

 

 








 

Net financing costs


(1)




(1)

 

 








 

Share of post-tax results of joint ventures


12 




12 

 

 








 

Profit/(loss) before income tax

3

318 


(68)



250 

 

 








 

Income tax


(67)


21 



(46)

 

 








 

Profit/(loss) for the year from continuing








 

operations


251 


(47)



204 

 

 








 

Profit for the year from discontinued








 

operations

6


5



5

 

 








 

Profit/(loss) for the year


251 


(42)



209 

 

 








 

Attributable to:








 

Equity holders of the parent







208 

 

Non-controlling interests







1

 

 








 

 







209 

 

 








 

 








 

 








 

 








 

Basic earnings per share:

7







 

Continuing operations


79.3p 





64.3p 

 

Discontinued operations






1.5p 

 

 








 

 


79.3p 





65.8p 

 

 








 

Diluted earnings per share:

7







 

Continuing operations


77.8p 





63.1p 

 

Discontinued operations






1.5p 

 

 








 

 


77.8p 





64.6p 

 

 

Page 16

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME




 





Six months


Year



Six months


ended


ended



ended


30 June


31 December



30 June


2012


2012



2013


(Restated)


(Restated)



£ million


£ million


£ million

 







Profit for the period


91 


102 


209 

 







Other comprehensive income:







 







Items that may be reclassified to profit and loss:







 







                Exchange movements on translation of







                foreign subsidiaries


25 


(9)


(34)

 







                Net (loss)/gain on hedges of net







                investment in foreign subsidiaries


(1)



 







                Tax on exchange movements


- 


(1)


(1)

 







                Cash flow hedges:







            Effective portion of changes in fair value


(1)



            Tax on effective portion of changes in fair         value


 


 

(1)


 

(1)

 

 

 


 

23


 

(8)


 

(32)

Items that will not be reclassified to profit and loss:







 







                Actuarial gains on defined benefit pension







                schemes


- 



37 

 







                Tax on actuarial gains


- 


(2)


(24)

 







 







 

 


 

- 


 


 

13 

 







 







Other comprehensive income

23 


(4)


(19)

 







Total comprehensive income

114 


98 


190 

 







Attributable to:







  Equity holders of the parent


115 


98 


189 

  Non-controlling interests


(1)



 







Total comprehensive income

114 


98 


190 

 

 

Page 17



CONDENSED CONSOLIDATED BALANCE SHEET


 

 

 

 

 

 


 

30 June 2013

 

30 June 2012

 

31 December 2012

 

Note

£ million

 

£ million

 

£ million

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

42 

 

38 

 

43 

Intangible assets

9

966 

 

978 

 

969 

Interests in joint ventures

 

45 

 

44 

 

47 

Retirement benefit assets

 

85 

 

35 

 

86 

Other receivables

10

27 

 

36 

 

27 

Deferred tax assets

 

54 

 

66 

 

42 


 

 

 

 

 

 

Total non-current assets

 

1,219 

 

1,197 

 

1,214 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Inventories

 

 

 

Trade and other receivables

 

1,104 

 

1,007 

 

1,014 

Derivative financial instruments

 

 

 

Current tax receivable

 

 

 

10 

Bank deposits (more than three months)

 

19 

 

18 

 

17 

Cash and cash equivalents

 

196 

 

452 

 

258 

 

 

 

 

 

 

 

Total current assets

 

1,333 

 

1,485 

 

1,304 

 

 

 

 

 

 

 

Total assets

 

2,552 

 

2,682 

 

2,518 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

Bank loans and overdrafts

 

(190)

 

(180)

 

(176)

Trade and other payables

 

(904)

 

(989)

 

(905)

Derivative financial instruments

 

(3)

 

(11)

 

(4)

Current tax payable

 

(63)

 

(60)

 

(66)

 

 

 

 

 

 

 

Total current liabilities

 

(1,160)

 

(1,240)

 

(1,151)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Trade and other payables

10

(10)

 

(1)

 

(11)

Retirement benefit liabilities

 

(99)

 

(80)

 

(93)

Deferred tax liability

 

(10)

 

 

(9)

Provisions

11

(173)

 

(178)

 

(171)

 

 

 

 

 

 

 

Total non-current liabilities

 

(292)

 

(259)

 

(284)

 

 

 

 

 

 

 

Total liabilities

 

(1,452)

 

(1,499)

 

(1,435)

 

 

 

 

 

 

 

Net assets

 

1,100

 

1,183 

 

1,083 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Share capital

 

152

 

163 

 

154 

Share premium account

 

101

 

101 

 

101 

Hedging and translation reserves

 

122

 

123 

 

99 

Capital redemption reserve

 

34

 

23 

 

32 

Retained earnings

 

688

 

772 

 

693 

Total equity attributable to equity holders

 

 

 

 

 

of the parent

 

1,097

 

1,182 

 

1,079 

 

 

 

 

 

 

 

Non-controlling interests


3



 


 





Total equity


1,100


1,183 


1,083 

 

Page 18



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 











Capital






Non-





Share


Share


Hedging


Transl'n


redemption


Retained




controlling


Total



capital


premium


reserve


reserve


reserve


earnings


Total


interests


equity



£ million


£ million


£ million


£ million


£ million


£ million


£ million


£ million


£ million




















As at 1 Jan 2013


154 


101 


(2)


101 


32 


693 


1,079 



1,083 




















Profit for the period







92 


92 


(1)


91 

 



















Exchange movements



















on translation of



















foreign subsidiaries





25 




25 



25 

Net loss on hedges of



















net investment in



















foreign subsidiaries





(1)




(1)



(1)

Effective portion of



















changes in fair value



















of cash flow hedges




(1)





(1)



(1)




















Other comprehensive



















income for the period




(1)


24 




23 



23 




















Total comprehensive



















income for the period




(1)


24 



92 


115 


(1)


114 




















Dividends







(108)


(108)



(108)

Equity settled share-



















based payments










Acquisition of shares



















by trustees of the



















Performance Share



















Plan







(2)


(2)



(2)

Utilisation of treasury



















shares










Acquisition of shares



















under the buyback



















programme


(2)









-




















As at 30 Jun 2013


152 


101 


(3)


125 


34 


688 


1,097 



1,100 

 

Page 19


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

 






























Capital


Retained




Non-


Total



Share


Share


Hedging


Transl'n


redemption


earnings


Total


controlling


equity



capital


premium


reserve


reserve


reserve


(Restated)


(Restated)


interests


(Restated)



£ million


£ million


£ million


£ million


£ million


£ million


£ million


£ million


£ million




















As at 1 Jan 2012


169 


101 


(4)


135 


17 


955 


1,373 



1,374 




















Profit for the period







102 


102 



102 

 



















Actuarial gains on defined benefit pension schemes










Tax on actuarial gains







(2)


(2)



(2)

Exchange movements



















on translation of



















foreign subsidiaries





(9)




(9)



(9)

Net gain on hedges of



















net investment in



















foreign subsidiaries










Tax on exchange



















movements





(1)




(1)



(1)

Effective portion of



















changes in fair value



















of cash flow hedges










Tax on effective portion



















of changes in fair value



















of cash flow hedges




(1)





(1)



(1)




















Other comprehensive



















income for the period





(9)




(4) 



(4) 




















Total comprehensive



















income for the period





(9)



106 


98 



98 




















Dividends







(98)


(98)



(98)

Equity settled share-



















based payments










Acquisition of shares



















by trustees of the



















Performance Share



















Plan







(6)


(6)



(6)

Acquisition of treasury



















shares







(25)


(25)



(25)

Utilisation of treasury



















shares










Acquisition of shares



















under the buyback



















programme


(6)






(133)


(133)



(133)

Forward share purchase



















agreement as at 30 June


 


 


 


 


 


 

(41)


 

(41)


 


 

(41)




















As at 30 Jun 2012


163 


101 


(3)


126 


23 


772 


1,182 



1,183 

 

 

Page 20

 



CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 

 

 

 

 

Six months

 

Year

 

 

 

Six months

 

ended

 

ended

 

 

 

ended

 

30 June

 

31 December

 

 

 

30 June

 

2012

 

2012

 

 

 

2013

 

(Restated)

 

(Restated)

 

 

 

£ million

 

£ million

 

£ million

Cash flow from operating activities

 

 

 

 

 

 

 

Profit before income tax from continuing operations

 

 

117 

 

120 

 

250 

(Loss)/profit before income tax from discontinued operations

 

 

(5)

 

 

 

 

 

 

 

 

 

 

Profit before income tax

 

 

112 

 

129 

 

256 

Financial income

 

 

(3)

 

(3)

 

(7)

Financial expense

 

 

4 

 

 

Share of post-tax results of joint ventures

 

 

(1)

 

(8)

 

(12)

Intangible amortisation

 

 

22 

 

19 

 

44 

Impairment of joint venture investment

 

 

- 

 

 

Depreciation

 

 

6 

 

 

11 

Loss on disposal of businesses

 

 

5 

 

 

11 

Difference between contributions to retirement benefit

 

 

 

 

 

 

 

schemes and current service cost

 

 

4 

 

 

(5)

Profit on disposal of property, plant and equipment

 

 

(1)

 

 

(2)

Loss on disposal of intangible assets

 

 

- 

 

 

Equity settled share-based payments

 

 

8 

 

 

15 

 

 

 

 

 

 

 

 

 

 

 

156 

 

161 

 

323 

Increase in inventories

 

 

(2)

 

 

-  

Increase in trade and other receivables

 

 

(89)

 

(156)

 

(154)

(Decrease)/increase in trade and other payables and

 

 

 

 

 

 

 

provisions

 

 

(24)

 

125 

 

102 

 

 

 

 

 

 

 

 

Cash generated from operations

 

 

41 

 

130 

 

271 

Tax (paid)/received

 

 

(29)

 

 

(29)

 

 

 

 

 

 

 

 

Net cash flow from operating activities

 

 

12 

 

131 

 

242 

 

 

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

 

 

Acquisition of businesses (net of cash acquired)

 

 

- 

 

(153)

 

(159)

Funding of joint ventures

 

 

(5)

 

(7)

 

(11)

Purchase of property, plant and equipment

 

 

(4)

 

(7)

 

(19)

Purchase of intangible assets

 

 

(7)

 

(8)

 

(15)

Movement in short-term bank deposits

 

 

(2)

 

10 

 

11 

Disposal of businesses (net of cash disposed of)

 

 

(1)

 

(4)

 

(6)

Disposal of property, plant and equipment

 

 

1 

 

 

Interest received

 

 

- 

 

 

Dividends received from joint ventures

 

 

5 

 

 6 

 

11 

Amounts paid on maturity of net investment hedges

 

 

(3)

 

(2)

 

(7)

 

 

 

 

 

 

 

 

Net cash flow from investing activities

 

 

(16)

 

(162)

 

(183)

 

 

 

 

 

 

 

 

Net cash flow before financing activities

 

(4)

 

(31)

 

59 

 

 

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

 

 

Proceeds from other borrowings

 

 

35 

 

 

150 

Interest paid

 

 

(2)

 

(2)

 

(9)

Dividends paid

 

 

(36)

 

(34)

 

(98)

Acquisition of shares for cancellation

 

 

(45)

 

(129)

 

(322)

Acquisition of treasury shares (net)*

 

 

5 

 

(17)

 

(27)

Acquisition of shares by trustees of the

 

 

 

 

 

 

 

Performance Share Plan

 

 

(2)

 

(6)

 

(6)

 

 

 

 

 

 

 

 

Net cash flow from financing activities

 

 

(45)

 

(188)

 

(312)

 

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(49)

 

(219)

 

(253)

Cash and cash equivalents as at the beginning of the period

 

 

232 

 

493 

 

493 

Exchange gains/ (losses) on cash and cash equivalents

 

 

8 

 

(2)

 

(8)

 

 

 

 

 

 

 

 

Cash and cash equivalents as at the end of the period

 

 

191 

 

272 

 

232 

 

 

 

 

 

 

 

 

Page 21




CONDENSED CONSOLIDATED CASH FLOW STATEMENT (continued)

 



30 June


30 June


31 December



2013


2012


2012



£ million


£ million


£ million

Cash and cash equivalents consist of:







Cash at bank and in hand


131 


351 


169 

Bank deposits (less than three months)


65 


101 


89 








Cash per the balance sheet


196 


452 


258 

Bank overdrafts


(5)


(180)


(26)








Cash and cash equivalents as at the end of the period


191 


272 


232 

Bank deposits (more than three months)


19 


18 


17 

Bank loans


(185)



(150)

 







Net cash as at the end of the period


25 


290 


99 

 

*Net of £5 million (six months ended 30 June 2012: £8 million; year ended 31 December 2012: £9 million) received from SAYE option holders on exercise of options.

 

NOTES TO THE ACCOUNTS

 

1. CORPORATE INFORMATION

 

The interim condensed accounts of AMEC plc for the six months ended 30 June 2013 were authorised for issue in accordance with a resolution of the directors on 8 August 2013.

 

AMEC plc is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK. The principal activities of the company and its subsidiaries (the group) are described in note 3.

 

2. PREPARATION OF INTERIM RESULTS

 

Basis of preparation

 

This condensed set of accounts has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU.  As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of accounts has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated accounts for the year ended 31 December 2012, except for the impact of new accounting standards adopted in the year.

 

The comparative figures for the year ended 31 December 2012 are not the group's statutory accounts for that financial year but are an extract from those accounts and have been restated for the impact of new accounting standards adopted in the year (see below).  The statutory accounts for the year ended 31 December 2012 have been reported on by the group's auditors and delivered to the Registrar of Companies.  The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

The consolidated accounts for the year ended 31 December 2012 were prepared in accordance with IFRS as adopted by the EU.  The accounts are presented rounded to the nearest million, however, all calculated numbers, for example earnings per share, are calculated on the underlying numbers to one decimal place precision.

 

Accounting standards adopted in the year

 

The following new accounting standards and amendments to existing standards have been adopted during the period.

 

IAS 19 'Employee Benefits' was amended in June 2011. The impact on the group has been to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit asset/liability.

 

The group's reported results and financial position have been restated as a result of the adoption of revised standard IAS 19 (2011).  The impact on the results for the period ended 30 June 2012 is to reduce net financing income by £6 million and reduce the income tax charge by £2 million, resulting in a lower profit after tax of £4 million.  Within the consolidated statement of other comprehensive income, the impact is an increase of £6 million to the actuarial gains on defined benefit schemes and an increase of £2 million in the tax on actuarial gains resulting in the increased total comprehensive income of £4 million.  The impact on the results for the year ended 31 December 2012 is an increase in cost of sales by £1 million, a reduction in net financing income by £12 million and a reduction in the income tax charge by £5 million, resulting in a lower profit after tax of £8 million.  Within the consolidated statement of other comprehensive income, the impact is an increase of £13 million to the actuarial gains on defined benefit schemes and an increase of £5 million in the tax on actuarial gains resulting in an increased total comprehensive income of £8 million.  There is no impact on either the net retirement benefit liability or related deferred tax balance within the balance sheet. 

Page 22

 

NOTES TO THE ACCOUNTS (continued)

 

2. PREPARATION OF INTERIM RESULTS (continued)

 

 

IFRS 10 'Consolidated Financial Statements' builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated accounts of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.

 

IFRS 11 'Joint Arrangements' replaces IAS 31 'Interests in Joint Ventures'. IFRS 11 considers the classification of joint arrangements in which two or more parties have joint control. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements.

 

IFRS 12 'Disclosures of Interests in Other Entities' includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

 

IFRS 13 'Fair Value Measurement', aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS.

 

Adoption of IFRS 10, 11, 12 and 13 has no impact on the group's reported results or financial position.

 

There are no other IFRS, IAS amendments or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.

 

During 2012, AMEC announced a new organisation structure, designed to more fully support the future needs of its customers.  The group is now managed geographically and the segmental analysis, as presented in note 3, has been restated to reflect the new structure of Americas, Europe and Growth Regions, together with Investment Services.

 

The preparation of condensed accounts requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Some of these policies require a high level of judgement, and AMEC believes that the most critical accounting policies and significant areas of judgement and estimation arise from the accounting for long-term contracts under IAS 11 'Construction contracts', for provisions under IAS 37 'Provisions, contingent liabilities and contingent assets' and for defined benefit pensions schemes under IAS 19 (revised) 'Employee Benefits'.

 

A significant amount of the group's activities are undertaken via long-term contracts.  These contracts are accounted for in accordance with IAS 11 which requires estimates to be made for contract costs and revenues.

 

Management base their judgements of contract costs and revenues on the latest available information, which includes detailed contract valuations.  In many cases the results reflect the expected outcome of long-term contractual obligations which span more than one reporting period.  Contract costs and revenues are affected by a variety of uncertainties that depend on the outcome of future events and often need to be revised as events unfold and uncertainties are resolved.  The estimates of contract costs and revenues are updated regularly and significant changes are highlighted through established internal review procedures.  In particular, the internal reviews focus on the timing and recognition of incentive payments and the age and recoverability of any unagreed income from variations to the contract scope or claims.  The impact of the changes in accounting estimates is then reflected in the ongoing results.

 

When accounting for provisions for litigation and other items the group has taken internal and external advice in considering known legal claims and actions made by or against the group.  It carefully assesses the likelihood of success of a claim or action.  Appropriate provisions are made for legal claims or actions against the group on the basis of likely outcome, but no provisions are made for those which in the view of management are unlikely to succeed. 

 

Defined benefit pension schemes are accounted for in accordance with the advice of independent qualified actuaries but significant judgements are required in relation to the assumptions for future salary and pension increases, inflation, the discount rate applied to the liabilities, investment returns and member longevity that underpin their valuations.  For AMEC, these assumptions are important given the relative size of the schemes that remain open.

 

The directors are satisfied that the group has adequate resources to operate for the foreseeable future and, therefore, it is appropriate to continue to adopt the going concern basis in preparing the accounts.  At 30 June 2013 the group held net cash of £25 million and had committed banking facilities of £477 million.

Page 23

NOTES TO THE ACCOUNTS (continued)

 

3.  SEGMENTAL ANALYSIS OF CONTINUING OPERATIONS

 

AMEC is a focused supplier of consultancy, engineering and project management services to customers in the world's oil and gas, mining, clean energy, and environment and infrastructure markets. Following a restructure in late 2012, the group's results are now reported on a geographic, rather than divisional basis.  This reflects the new structure, introduced to strengthen customer focus and so maximise potential growth opportunities.  Each of the three geographies is considered to be a reportable segment.

 

AMEC's Chief Executive together with the senior management team constitutes the chief operating decision maker and they regularly review the performance of these three geographies, as well as the Investment Services segment.  Details of the services offered by each business unit and the end markets in which they operate are given in the segmental review on pages 5 to 10.

 



Revenue

Profit/(loss)



Six


Six




Six


Six





months


months


Year


months


months


Year



ended


ended


ended


ended


ended


ended



30 June


30 June


31 December


30 June


30 June


31 December



2013


2012


2012


2013


2012


2012





(Restated)


(Restated)

 



(Restated)


(Restated)



£ million


£ million


£ million

 

£ million


£ million


£ million

Class of business:













Americas


1,154 


1,218 


2,500 


113 


111 


233 

Europe


596 


555 


1,150 


39 


44 


91 

Growth Regions


265 


262 


531 


16 


12 


32 

Investment Services






















2,017 


2,037 


4,190 


176 


170 


363 

Internal revenue


(19)


(11)


(32)




















External revenue


1,998 


2,026 


4,158 




















Corporate costs1








(18)


(18)


(33)

EBITA2








158 


152 


330 

Net financing costs3








(4)


(1)


(7)

Adjusted profit before tax








154 


151 


323 

Tax on results of joint













ventures4








(1)


(2)


(5)









153 


149 


318 














Intangible amortisation








(22)


(19)


(44)

Exceptional items








(14)


(10)


(24)

 













Profit before income tax








117 


120 


250 

 

1Corporate costs comprise the costs of operating central corporate functions and certain regional overheads.

2 EBITA is earnings from continuing operations before net financing income, tax, intangible amortisation and pre-tax exceptional items of £153 million (six months ended 30 June 2012: £140 million; year ended 31 December 2012: £307 million), but including joint venture EBIT of £5 million (six months ended 30 June 2012: £12 million: year ended 31 December 2012 : £23 million).

3Net financing costs includes AMEC's share of net interest payable of joint ventures.

4The share of post-tax results of joint ventures is further analysed as follows:

 









Six


Six











months


months


Year









ended


ended


ended









30 June


30 June


31 December









2013


2012


2012





 


 

 

£ million


£ million


£ million





 


 

 

 

 

 

 

 

EBIT









12 


23 

Net financing costs








(3)


(2)


(6)

Tax








(1)


(2)


(5)
























12 














 

Page 24



 

NOTES TO THE ACCOUNTS (continued)

 

4.  AMORTISATION AND EXCEPTIONAL ITEMS

 



Six months


Six months





ended


ended


Year ended



30 June


30 June


31 December



2013


2012


2012 



£ million


£ million


£ million 








Continuing operations:







      Administrative expenses - exceptional items


(8)


(10)


(24)

      Administrative expenses - intangible amortisation


(22)


(19)


(44)



(30)


(29)


(68)

Loss on business disposals and closures


(6)





(36)


(29)


(68)

Taxation credit on exceptional items of continuing operations




Taxation credit on intangible amortisation




12 



11 



21 

Post-tax exceptional amortisation and exceptional items







of continuing operations


(25)


(20)


(47)

Exceptional items of discontinued operations (post-tax)


(4)



Post-tax amortisation and exceptional items


(29)


(13)


(42)

 








Post-tax exceptional items


(13)



(10)

Post-tax intangible amortisation


(16)


(13)


(32)



(29)


(13)


(42)

 

 

Post-tax exceptional items are further analysed as follows:

 



 

Six months ended 30 June 2013


Loss in


Loss on



 




respect of


business


Other




Loss on


business


disposals


exceptional




disposals


closures


and closures


items


Total


£ million


£ million


£ million


 £ million


£ million











Continuing operations


(6)


(6)


(8)


(14)

Discontinued operations

(5)



(5)



(5)

Loss before tax

(5)


(6)


(11)


(8)


(19)

Tax





Loss after tax

(4)


(2)


(6)


(7)


(13)











 

Additional indemnity provisions of £8 million and costs in respect of a business sold in a prior year (and classified as discontinued) were offset by the release of a £5 million litigation provision no longer required, and foreign exchange movements on indemnity provisions established on the disposal of SPIE, to give a pre-tax exceptional loss on disposals of £5 million. There were additional litigation provisions and costs totalling £6 million in respect of a business closed in a prior year (and classified as continuing).

 

Other exceptional costs of £8 million include costs of £7 million associated with restructuring following the management reorganisation into geographic business units and transaction and deferred compensation costs which, in line with IFRS 3, are charged to the income statement.  Transaction costs of £1 million were incurred in the period.

 

Six months ended 30 June 2012


Profit in


Loss on



 




respect of


business


Other




Loss on


business


disposals


exceptional




disposals


closures


and closures


items


Total


£ million


£ million


£ million


 £ million


£ million











Continuing operations




(10)


(10)

Discontinued operations

(8)



(8)


17 


(Loss)/profit before tax

(8)



(8)



(1)

Tax




(1)


(Loss)/profit after tax

(6)



(6)













Page 25

 

NOTES TO THE ACCOUNTS (continued)

 

4.  AMORTISATION AND EXCEPTIONAL ITEMS (continued)

 

Adjustments to provisions held in respect of businesses sold or closed in prior years and foreign exchange movements on provisions established on the disposal of SPIE resulted in the pre-tax exceptional loss on disposals and closures of £8 million.

 

Other exceptional gains of £7 million included IFRS 3 acquisition, transaction and deferred compensation costs along with the £11 million costs of funding a joint venture which was part of a recent acquisition.  These costs were offset by a £3 million credit from adjustments to deferred consideration and the provisions established on the exit from Libya along with the recognition of a £17 million insurance receivable following the Supreme Court Judgement on mesothelioma liability, a provision against which was established a number of years ago.  Transaction costs of £2 million were incurred in the period.

 

Year ended 31 December 2012


 




Profit in


Loss on



 




respect of


business


Other




Loss


business


disposals


exceptional




on disposals


closures


and closures


items


Total


£ million


£ million


£ million


 £ million


£ million











Continuing operations




(24)


(24)

Discontinued operations

(11)



(11)


17 


Loss before tax

(11)



(11)


(7)


(18)

Tax





Loss after tax

(8)



(8)


(2)


(10)











 

A loss on disposals of £11 million arose from adjustments to provisions held in respect of a business sold in prior years (and classified as discontinued) and foreign exchange movements on provisions established on the disposal of SPIE.

 

Exceptional costs of £24 million in continuing operations included the £11 million costs of funding a joint venture which was part of a recent acquisition, costs of £11 million associated with restructuring following the management reorganisation into geographic business units and transaction and deferred compensation costs which, in line with IFRS 3, are charged to the income statement.  Transaction costs of £2 million were incurred in the year.

 

The exceptional gain in discontinued operations of £17 million arises from the recognition of an insurance receivable following the Supreme Court judgement on mesothelioma liability, a provision against which was established a number of years ago.

 

5.  INCOME TAX

 

Income tax on the profit before exceptional items and intangible amortisation but including joint venture profit before tax for the six months ended 30 June 2013 is based on an effective rate of 22.0 per cent (six months ended 30 June 2012: 23.5 per cent).  The effective tax rate for the full year is expected to be 23 per cent.

 

In his Budget Speeches on 21 March 2012 and 20 March 2013, the UK Chancellor of the Exchequer announced reductions in the rate of corporation tax from 26 per cent to 24 per cent from 1 April 2012, to 23 per cent from 1 April 2013, to 21 per cent by 1 April 2014 and a further reduction to 20 per cent by 1 April 2015.

 

As at 30 June 2013, the reduction in the rate to 23 per cent had been substantively enacted.  However the remaining reductions in the rate were not substantively enacted by the balance sheet date and therefore the rate changes are not reflected in the figures reported.

 

The decrease in the rate from 23 per cent to 20 per cent would increase the balance sheet deferred tax liability by approximately £3 million, and would have an insignificant impact on unrecognised deferred tax assets.  During the period to 2015, the effect of the proposed changes to income and equity is estimated to be a charge of £3 million to the income statement.

 

Page 26

NOTES TO THE ACCOUNTS (continued)

 

6.  (LOSS)/PROFIT FOR THE PERIOD FROM DISCONTINUED OPERATIONS

 

Discontinued operations represent the residual assets and retained obligations in respect of businesses sold in prior years.

 

In accordance with IFRS 5, the post-tax results of discontinued operations are disclosed separately in the condensed consolidated income statement.

 

The results of the discontinued operations are as follows:



Six months


Six months




ended


ended




30 June


30 June




2013


2012




£ million


£ million








Loss on disposal


(5)


(8)


Attributable tax on loss on disposal




Other exceptional items



17 


Attributable tax on other exceptional items



(4)









(Loss)/profit for the period from discontinued operations


(4)


 7 














Other exceptional items in 2012 relate to the recognition of an insurance receivable following the Supreme Court judgement on mesothelioma liability.

 

7.  EARNINGS PER SHARE

 

Basic and diluted earnings per share are shown on the face of the income statement.  The calculation of the average number of shares in issue has been made having deducted the shares held by the trustees of the Performance Share Plan, those held by the qualifying employee share ownership trust and those held in treasury by the company. 

 


Six months ended 30 June 2013


Six months ended 30 June 2012


Year ended 31 December 2012






















Weighted






Weighted






Weighted






average






average


Earnings




average


Earnings




shares


Earnings


Earnings


shares


per share


Earnings


shares


per share


Earnings


number


per share


(Restated)


number


(Restated)


(Restated)


number


(Restated)


£ million


 million


pence


£ million


 million


pence


£ million


 million


pence



















Basic earnings from



 


 




 


 




 


 

continuing operations

96


294 


32.6 


95


324


29.3 


203 


315 


64.3 




 


 




 


 




 


 

Share options

-



(0.1)


-


2


(0.2)




(0.4)






 




 


 




 


 

Employee share and





 




 


 




 


 

incentive schemes

-



(0.5)


-


4


(0.4)




(0.8)




 


 




 


 




 


 

Diluted earnings from



 


 




 


 




 


 

continuing operations

96


299 


32.0 


95


330


28.7 


203 


321


63.1 




 


 




 


 




 


 

 

 


Six months ended 30 June 2013


Six months ended 30 June 2012


Year ended 31 December 2012




Weighted






Weighted






Weighted






average






average