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AMEC PLC (AMFW)

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Thursday 07 August, 2014

AMEC PLC

Half Yearly Report

RNS Number : 4766O
AMEC PLC
07 August 2014
 



AMEC plc 2014 half-year results

 

 

Highlights

·      Underlying1 revenue up 4% and EBITA up 5%

o Underlying margins stable

·      Reported revenue £1,858 million, and EBITA £152 million

o Down 7% and 4% respectively

·      Order book of £4.2 billion, up 16% on underlying basis

·      Interim dividend per share up 10%, to 14.8p pence

·      Offer for Foster Wheeler expected to complete in early Q4

·      Expected full year impact on reported numbers of stronger Sterling remains

o Revenue £250 million and EBITA £25 million

 

 

Chief Executive Samir Brikho said:

                                                                  

"We have reported underlying revenue growth of 4% and stable margins in the first half. As expected, we are seeing less greenfield activity in some of our key upstream oil and gas markets, which is partially offsetting the strong growth from Clean Energy and Middle Eastern Oil & Gas.  

 

"We now expect to see modest underlying revenue growth in 2014 for our existing operations. As discussed previously, the mix of business will result in a slight reduction in group margins compared to last year. As in 2013, profits and cash flow generation will be second-half weighted.

 

"The acquisition of Foster Wheeler continues to make good progress, with integration planning well underway and completion now expected early in the fourth quarter. We believe the combination of AMEC and Foster Wheeler is a compelling one, for our shareholders, our customers and our employees.

 

"A 10 per cent increase in the interim dividend signals our belief in the underlying strength of AMEC."

 

Results presentation and live webcast: AMEC will host a presentation on the half-year results and update on the combination with Foster Wheeler for analysts and investors at 8.30am today. A live webcast of the event and presentation slides will be available on amec.com

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

 

(1) Underlying excludes the impact of acquisitions, disposals, currency fluctuations and changes to levels of pass through incremental procurement 

Enquiries to:

AMEC plc:

+ 44 (0)20 7429 7500

Samir Brikho, Chief Executive


Ian McHoul, Chief Financial Officer


Julian Walker, Director of Communications


Rupert Green, Interim Head of Investor Relations




Media:


Brunswick Group LLP  - Mike Harrison and Dania Saidam

+ 44 (0)20 7404 5959

 



 

Financial highlights

Group

 

Six months ended 30 June

 


2014

2013

Change (%)






Revenue

(£m)

1,858

1,991

-7%






EBITA1

(£m)

152

159

-4%






Adjusted profit before tax3

(£m)

150

155

-3%






Profit before tax

(£m)

 83

118

-29%

 

Operating cash flow4

 

(£m)

 

39

 

59

 

-34%






Adjusted diluted earnings per share5

pence

39.1

40.6

-4%






Diluted earnings per share from continuing operations

 

pence

 

19.8

 

32.2

 

-39%






Dividend per share

pence

14.8

13.5

+10%

 

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 £2 million (H1 2013: £4 million)

4.     Cash generated from operations before: exceptional items, discontinued operations and legacy settlements, pension payments in excess of current service cost and certain foreign exchange movements, 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.

 

Segmental analysis

Amounts and percentage movements relating to continuing segmental earnings before net financing income, tax and intangible amortisation (EBITA) are stated before corporate costs of £16 million (H1 2013: £18 million) and pre-tax exceptional costs of £44 million (H1 2013: £14 million).  

 

Discontinued operations

The comparative figures for 2013 have been restated to present the UK Conventional Power business as a discontinued operation. The impact on the six months ended 30 June 2013 is an increase in profit from continuing operations of £1 million with a corresponding increase in the loss from discontinued operations. See note 2 for more details.

 

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'.

 



H1 2014 results overview









Group


2014

Underlying ex. proc

Incremental procurement

Currency exchange

Acquisitions

2013

 

Six months ended 30 June

 

Revenue

(£m)

  1,858

+67

(50)

          (160)

               +10

1,991

 

     Y-on-Y change

(%)

(7)

+4

(3)

(8)

nil


 

EBITA

(£m)

152

+8

nil

(16)

+1

159

 

     Y-on-Y change

(%)

(4)

+5

nil

(10)

+1


 

EBITA margin2

(%)

      8.2





     8.0

 

     Y-on-Y change

(bps)

+20






 




 

+0.6 


 

(0.3)

 

nil


 

Order book

(£bn)

4.2

nil

3.9

 

     Y-on-Y change

(%)

+9

+16 

nil

(7)

nil


 

 

Revenue for the first six months of 2014 fell 7 per cent to £1,858 million (H1 2013: £1,991 million), including the £160 million impact of adverse currency translation arising from the strength of Sterling. Underlying revenue, excluding incremental procurement, was 4 per cent ahead of last year.

 

EBITA declined 4 per cent to £152 million (H1 2013: £159 million) with EBITA margins up by 20 basis points to 8.2 per cent (H1 2013: 8.0 per cent). Excluding the impact of incremental procurement, margins were flat.

 

Adjusted profit before tax of £150 million in H1 2014 was 3 per cent lower than the previous year (H1 2013: £155 million). After joint venture tax of £2 million (H1 2013: £1 million), amortisation of £21 million (H1 2013: £22 million) and exceptional costs of £44 million (H1 2013: £14 million), profit before tax was £83 million (H1 2013: £118 million). The tax charge for H1 2014, including tax on amortisation and exceptional items, was £24 million (H1 2013: £22 million) resulting in a total profit from continuing operations for H1 2014 of £59 million (H1 2013: £96 million).

 

Adjusted diluted earnings per sharefrom continuing operations were 39.1 pence (H1 2013: 40.6 pence).

 

Operating cash flow for the period was £39 million, down £20 million from the comparable period last year (H1 2013: £59 million). This reduction was predominantly due to short-term timing effects in working capital. Full-year cash flow is expected to be good once again, with cash conversion in line with recent years.

 

Dividend, 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, and therefore expects to maintain its progressive dividend policy. Maintaining an efficient capital structure also remains a key component of AMEC's strategy.

 

At 30 June 2014 AMEC had net cash of £28 million. Post the acquisition of Foster Wheeler AMEC will retain a strong balance sheet.

 

A 10 per cent increase in the interim dividend to 14.8 pence per share (H1 2013: 13.5 pence) demonstrates the board's continuing confidence in the group's future performance.

 

Acquisition of Foster Wheeler

On 13 February 2014 AMEC announced it had entered into a definitive agreement to acquire Foster Wheeler. 

 

The terms of the acquisition were originally announced on 13 January 2014, with Foster Wheeler shareholders receiving 0.8998 new AMEC securities and $16.00 in cash for each Foster Wheeler share.

 

The cash portion of the consideration will be financed by a combination of AMEC's existing cash resources and new debt financing. The securities portion of the consideration will be satisfied by the issuance of approximately 90 million new AMEC securities to Foster Wheeler shareholders, which, at the election of Foster Wheeler shareholders, will be issued in the form of either ordinary shares or American Depositary Shares (for which AMEC is seeking a US listing).

 

All anti-trust approvals required for completion have been now been received. Foster Wheeler held a general meeting on 10 July 2014, where its shareholders approved the amendments to its articles of association necessary for the transaction. In due course, it is expected that an AMEC shareholder meeting will be called in order to approve the transaction and the tender offer to Foster Wheeler shareholders will be launched. The acquisition of Foster Wheeler is expected to complete early in the fourth quarter. 

 

On completion of the acquisition, Foster Wheeler shareholders will hold shares in AMEC representing approximately 23 per cent of AMEC's enlarged share capital. It is expected that following completion two current directors of Foster Wheeler will join the AMEC board as non-executive directors.

 

Average number of employees

The average number of employees was down 7 per cent in the first half, to 27,032.

 

Average number of employees

Six months ended 30 June

2014

2013

     Change (%)

 

Americas

13,023

14,762

-12

Europe

9,947

10,744

-7

Growth Regions

3,795

3,186

+19

Centre

267

 

236

 

+13

Group

27,032

28,928

-7

 

The reduction in Americas reflects in particular de-manning on the Kearl project during the second half of 2013. Movements in the other regions broadly reflect underlying performance.

 

Outlook  

We now expect to see modest underlying revenue(1) growth in 2014 for our existing operations, led by ongoing strength in the Clean Energy market and Middle Eastern Oil and Gas. As discussed previously, the mix of business will result in a slight reduction in group margins compared to last year. As in 2013, profits and cash flow generation will be second-half weighted.

 

Actual exchange rates year to date, and forecast average North American exchange rates for the remainder of 2014, continue to be less favourable than 2013. This currently translates into a year on year impact on revenues of circa £250 million, and for EBITA of circa £25 million for the full year.

 

The acquisition of Foster Wheeler is expected to close early in the fourth quarter, and be double-digit earnings enhancing in the first 12 months after completion. The combination of Foster Wheeler and AMEC is expected to create sustainable value for shareholders for the long term, with ROIC expected to exceed the cost of capital in the second twelve months' period after completion.

 

(1)   Underlying revenue excludes the impact of acquisitions, disposals, currency fluctuations and changes to the levels of pass through incremental procurement


 

Segmental review

 

Americas

Americas is the largest business unit, generating 56 per cent of group revenue in H1 2014.   The portfolio of activities is well balanced across all four markets, with revenue broken down as follows:

 

Americas

Six months ended 30 June


2014

2013

Oil & Gas

(%)

29

37

Mining

(%)

15

19

Clean Energy

(%)

36

25

Environment & Infrastructure

(%)

20

19

 

Americas

Six months ended 30 June


2014

Underlying excl proc.

Incremental procurement

Currency exchange

Acquisitions

2013









Revenue

(£m)

   1,060

+80

(50)

(134)

+10

1,154

     Y-on-Y change

(%)

(8)

+7

(4)

(12)

+1


EBITA

(£m)

102

+2

nil

(14)

+1

113

     Y-on-Y change

(%)

(9)

+2

nil

(12)

+1


EBITA margin

(%)

9.7





9.8

     Y-on-Y change

(bps)

(10)






Order book

(£bn)

1.4

-

nil

(0.2)

nil

1.6

     Y-on-Y change

(%)

(13)

(1)

nil

(12)

nil


 

Revenue in Americas was down 8 per cent to £1,060 million, while underlying revenue was up 7 per cent compared with the same period last year. Incremental procurement at £50 million was £50 million lower than the first half last year. A strong performance in Clean Energy helped to offset a slow-down in conventional oil & gas and continued weakness in oil sands. Underlying Mining revenues were flat.

 

EBITA was down 9 per cent to £102 million (H1 2013: £113 million). The EBITA margin at 9.7 per cent was down 10 basis points from 2013.

 

Contract wins in 2014 included:

 

Customer

Market

Description

   Country

UPS

E&I

Multi-year programme management

US

K+S

Mining

EPCM for Legacy potash project expansion

Canada

NewGold

Mining

Detailed engineering, EPCM for Rainy River gold mine

Canada





Other current projects include an EPC contract for a 250MW solar array for SEMPRA Energy, engineering and procurement for the Kearl expansion phase for Imperial, programme management work for Honeywell.

The order book as at 30 June 2014 was £1.4 billion, down 13 per cent since the same period last year, was stable on an underlying basis.

 

Americas outlook

First half revenue trends (underlying and excluding incremental procurement) are expected to continue into the second half. Incremental procurement is expected to be minimal in the second half.

 

Full-year margins are expected to be lower compared to the full year 2013 due to the mix in end market activities.

 

 

Europe

 

Europe generated 29 per cent of group revenue in H1 2014, with most of the work in the UK North Sea and nuclear markets. H1 revenue can be analysed by market as shown below:

 

Europe

Six months ended 30 June


2014

2013

Oil & Gas

(%)

65

67

Mining

(%)

nil

nil

Clean Energy

(%)

30

29

Environment & Infrastructure

(%)

5

4

 

Europe

Six months ended 30 June


2014

Underlying business

Currency exchange

Net acquisitions

2013 

Revenue

(£m)

             545

(44)

nil

nil

       589

     Y-on-Y change

(%)

(7)

(7)

nil

nil


EBITA

(£m)

45

+5

nil

nil

40

     Y-on-Y change

(%)

+13

+13

nil

nil


EBITA margin

(%)

8.2




6.7

     Y-on-Y change

(bps)

+150





Order book

(£bn)

1.9

+0.3

nil

nil

1.6

     Y-on-Y change

(%)

+20

+20

nil 

nil 


 

The comparative figures for 2013 have been restated to present the UK Conventional Power business as a discontinued operation.

 

Revenue in Europe was down 7 per cent to £545 million, reflecting lower greenfield activity in the UK North Sea, as expected.

 

EBITA was up 13 per cent at £45 million with EBITA margin up 150 basis points to 8.2 per cent (H1 2013: 6.7 per cent). Margins benefited from the non-recurrence of the losses arising from delays to the Teesside Gas Processing Plant (TGPP) contract, and reflect a good performance in UK North Sea brownfield and asset support. The Sellafield joint venture contributed £3 million (H1 2013: £3 million).

 

Contract awards announced in 2014 reflect continued investment in the UK North Sea and the clean energy market.

 

Customer

Sector

Description

   Country

 

Nexen

O&G

6-year brownfield EPC

UK North Sea

Shell ONEGas

O&G

5 year brownfield engineering and support

UK and Dutch North Sea

National Grid

Clean Energy

Framework design for high voltage cables and over head transmission lines

UK

PGE

Clean Energy

Preferred bidder to be Owner's engineer for nuclear new build programme

Poland

MoD

E&I

Framework contract to provide range of specialist technical service

UK

 

 

Other projects include ongoing work on Clair Ridge for BP, the general operating contract for the Dunlin assets for Fairfield, consulting and engineering services for the UK nuclear new build programme of EDF.

 

The order book as at 30 June was £1.9 billion (30 June 2013: £1.6 billion). The Sellafield decommissioning contract, as an equity accounted joint venture, is not included in these figures.

 

Europe outlook

Underlying revenue trends and margin are expected to improve in H2.


 

Growth Regions

Growth Regions generated 15 per cent of group revenue in H1 2014, with oil & gas activities driving much of the activity.  H1 revenues can be analysed by market as follows:

Growth Regions

Six months ended 30 June


2014

2013

 

Oil & Gas

(%)

74

66

 

Mining

(%)

15

11

 

Clean Energy

 

(%)

1

4

 

Environment & Infrastructure

(%)

10

19

 








Growth Regions


2014

Underlying business

Currency exchange

Acquisitions

2013

Six months ended 30 June

Revenue

(£m)

279

+40

(26)

nil

265

     Y-on-Y change

(%)

+5

+15

(10)

nil


EBITA

(£m)

17

+3

(2)

nil

16

     Y-on-Y change

(%)

+4

+13

(9)

nil


EBITA margin

(%)

6.0




6.1

     Y-on-Y change

(bps)

(10)





Order book

(£bn)

0.9

+0.3

(0.1)

nil

0.7

     Y-on-Y change

(%)

+30

+41

(11) 

nil 


 

Revenue in the Growth Regions was £279 million, led by a strong performance in the Middle East oil & gas market, and an increase in early stage mining activity. Underlying revenue growth was 15 per cent.

 

EBITA was up 4 per cent, to £17 million and the EBITA margin was 6.0 per cent, down 10 basis points from H1 2013. Margin improvement continued to be held back by the overall lack of scale across the region.

 

Contract awards so far in 2014 reflect the strength of the oil & gas market in the Middle East and Azerbaijan.

 

Customer

Sector

Description

   Country

 

KOC

O&G

5-year project management support for major upstream projects

Kuwait

BP

O&G

ATA consortium will deliver two topsides for Shah Deniz expansion, with AMEC providing project management

Azerbaijan

Arrow Energy

O&G

EPCM for Daandine gas field expansion

Australia

Sinopec + China Coal Energy

O&G

EPC for Zhongtian Hechuang plant explansion

China

Rex Minerals

Mining

Early contractor involvement on Hillside copper project

Australia

ENEC

Clean Energy

Framework contract to provide nuclear consultancy services to support new build programme

UAE

US Air Force

E&I

Design and build facilities for the US Space Fence programme

Marshall Islands

 

 

Other current projects include project management services for the new refinery project and engineering support services at existing refineries for KNPC, project management on the Umm Lulu field for ADMA and Zadco phase II for Zadkum and engineering on the Husab uranium mine in Namibia for Swakop.

 

The order book at 30 June 2014 was £0.9 billion, up 30 per cent.

 

Growth Regions outlook

Underlying revenue trends are expected to continue into H2, with margin remaining flat this year.

 

Investment Services

This now comprises the Incheon Bridge PPP project in Korea, the group's insurance captive, AMEC's  wind development activities and a range of other non-core activities.  

Lancashire Waste PFI project was divested during the period.

Revenue was £3 million (H1 2013: £2 million). EBITA of £4 million (H1 2013: £8 million) reflects the successful exit from assets in North America during 2013.



 

FINANCIAL REVIEW

Administrative expenses 

Administrative expenses of £103 million were £9 million lower than the prior period (H1 2013: £112 million), as a result of currency movements and a reassessment of the expected vesting of certain share based payment awards.

Net financing income/(expense)

The net financing income for the first half of £1 million (H1 2013: net financing expense of £1 million) included net interest on pensions assets of £1 million (H1 2013: £nil) and other items of £nil (H1 2013: £(1) million). AMEC's share of interest payable of equity accounted joint ventures was £3 million (H1 2013: £3 million).

Taxation

Continuing operations

The group's effective tax rate for the first six months of 2014 for the continuing businesses (including tax attributable to joint venture interests) before exceptional items and excluding intangible amortisation was 22 per cent (H1 2013: 22 per cent). The full year tax rate is expected to be approximately 22 per cent.

Deferred tax

As at 30 June 2014, the group had net deferred tax assets of £25 million (30 June 2013: £44 million, 31 December 2013: £15 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 2014 of £28 million (30 June 2013: £25 million, 31 December 2013: £121 million) and committed and available facilities of £477 million, including a £377 million five-year multi-currency revolving facility plus a £100 million one-year term loan.

On 13 February 2014, the group entered into a $2.16 billion credit facility.  The funds provided under this facility are to finance the acquisition of Foster Wheeler and the fees, expenses, costs and taxes associated with the acquisition; repaying the existing £100 million term loan and general corporate purposes. On 14 July 2014 one of the facilities was increased by $100 million to allow for a transition of Letters of Credit issued under the main Foster Wheeler facility. 

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 £21 million (H1 2013: £22 million).

Going concern

The directors are satisfied that the group has adequate resources to operate for the foreseeable future. As at 30 June 2014, the group held net cash of £28 million and had committed and available banking facilities of £477 million. 

Exceptional items

Total pre-tax exceptional losses of £52 million (H1 2013: £19 million) included:

§ A loss of £20 million on the disposal of the group's investment in the Lancashire Waste JV;

§ A loss on business disposals of £8 million arising from adjustments to existing provisions made in respect of prior year business disposals and a gain of £5 million from the release of a provision no longer required in respect of a business closed in a prior year; and

§ Other exceptional costs of £29 million including transaction costs of £26 million associated with the proposed acquisition of Foster Wheeler AG.

Cash flow

Cash generated from operations in the first half of 2014 was £11 million (H1 2013: £41 million).  After adjusting for exceptional items, discontinued operations and legacy settlements, the difference between pension payments and current service cost and certain foreign exchange movements but including dividends received from joint ventures, operating cash flow was £39 million  (H1 2013: £59 million). This reduction was predominately due to short-term timing effects in working capital.  Full-year cash flow is expected to be good 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 2014 was £102 million (30 June 2013: £85 million, 31 December 2013: £102 million). The schemes have operated on a career average salary basis since 1 January 2008. The principal UK pension scheme is 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 2014 was £63 million (30 June 2013: £99 million, 31 December 2013: £62 million).

Legacy issues

There have been no significant new legacy issues identified in the first half of 2014. Provisions currently held for future costs of litigation total £30 million (30 June 2013: £40 million, 31 December 2013: £37 million).

Provisions

Provisions held as at 30 June 2014 were £155 million (30 June 2013: £173 million, 31 December 2013: £163 million). During H1 2014, £14 million of the brought forward provisions were utilised.

As part of the ongoing review of the potential liabilities, £8 million of provisions were released as they were no longer required; this included £5 million in respect of a prior year business closure which has been credited as an adjustment to the previously reported loss on disposal within continuing operations.

Additional provisions of £12 million were created which included £8 million in respect of indemnities granted on prior year disposals, which have been charged as an adjustment to the previously reported profit on disposal within discontinued operations.


Provisions are analysed as follows:

As at 30 June 2014

£ million

Litigation provisions

30

Indemnities granted to buyers and retained obligations on disposed businesses

77

Insurance, onerous property contracts and provisions to fund joint ventures

48

Total

155

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 predominantly 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.

In order to mitigate the risks associated with the acquisition of Foster Wheeler and the integration of the AMEC and Foster Wheeler businesses, AMEC has put in place:

·      robust processes for the preparation and submission of the documents and filings, including anti-trust documents

·      guidelines around communications and investor relations

·      detailed integration planning with an Integration Director appointed to lead the integration project steering committee supported by external consultants.

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 16, 19, 23, 26, 34 and 38 of the 2013 annual report and accounts. These are a major 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. As a result of the acquisition of Foster Wheeler, AMEC may be exposed to new risks and/or its exposure to its principal risks may be augmented.

CONDENSED CONSOLIDATED INCOME STATEMENT                                                  


Six months ended 30 June 2014


 



Before


Amortisation




 



amortisation


and




 



and


exceptional




 



exceptional


items




 



items


(note 4)



Total

 


Note

£ million


£ million



£ million

 

 








 

Continuing operations








 

 








 

Revenue

3

1,858 




1,858 

 

 








 

Cost of sales


(1,614)




(1,614)

 

 








 

Gross profit


244 




244 

 

 








 

Administrative expenses


(103)


(50)



(153)

 

 








 

Loss on business disposals and closures



(15)



(15)

 

 








 

Profit/(loss) before net financing expense


141 


(65)



76 

 

 








 

Financial income





 

Financial expense


(4)




(4)

 

 








 

Net financing income





 

 








 

Share of post-tax results of joint ventures





 

 








 

Profit/(loss) before income tax

3

148 


(65)



83 

 

 








 

Income tax

5

(31)




(24)

 

 








 

Profit/(loss) for the period from continuing








 

operations


117 


(58)



59 

 

 








 

Loss for the period from discontinued








 

operations

6

(8)


(7)



(15)

 

 








 

Profit/(loss) for the period


109 


(65)



44 

 

 








 

Attributable to:








 

Equity holders of the parent







44 

 

Non-controlling interests







 

 








 

 







44 

 

 








 

 








 

 








 

 








 

Basic earnings/(loss) per share:

7







 

Continuing operations


39.9p 





20.2p 

 

Discontinued operations


(2.9)p





(5.2)p

 

 








 

 


37.0p 





15.0p 





(1.4)p

 








 

Diluted earnings/(loss) per share:

7







 

Continuing operations


39.1p 





19.8p 

 

Discontinued operations


(2.8)p





(5.1)p

 

 








 

 


36.3p 





14.7p 

 



CONDENSED CONSOLIDATED INCOME STATEMENT                                                  


Six months ended 30 June 2013


 



Before








amortisation


Amortisation






and


and






exceptional


exceptional






items


items



Total



(Restated)


(note 4)



(Restated)


Note

£ million


£ million



£ million

 








Continuing operations








 








Revenue

3

1,991 




1,991 

 








Cost of sales


(1,725)




(1,725)

 








Gross profit


266 




266 

 








Administrative expenses


(112)


(30)



(142)

 








Loss on business disposals and closures



(6) 



(6) 

 








Profit/(loss) before net financing expense


154 


(36)



118 

 








Financial income





Financial expense


(4)




(4)

 








Net financing expense


(1)




(1)

 








Share of post-tax results of joint ventures





 








Profit/(loss) before income tax

3

154 


(36)



118 

 








Income tax

5

(33)


11 



(22)

 








Profit/(loss) for the period from continuing








operations


121 


(25)



96 

 








Loss for the period from discontinued








operations

6

(1) 


(4)



(5)

 








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


41.3p 





32.8p 

Discontinued operations


(0.2)p





(1.6)p

 








 


41.1p 





31.2p 

 








Diluted earnings/(loss) per share:

7







Continuing operations


40.6p 





32.2p 

Discontinued operations


(0.2)p





(1.6)p

 








 


40.4p 





30.6p 

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT


Year ended 31 December 2013


 



Before






 



amortisation


Amortisation




 



and


and




 



exceptional


exceptional




 



items


items



Total

 





(note 4)





Note

£ million


£ million



£ million

 

 








 

Continuing operations








 

 








 

Revenue

3

3,974 




3,974 

 

 








 

Cost of sales


(3,431)




(3,431)

 

 








 

Gross profit


543 




543 

 

 








 

Administrative expenses


(228)


(65)



(293)

 

 








 

Loss on business disposals and closures



(7)



(7)

 

 








 

Profit/(loss) before net financing expense


315 


(72)



243 

 

 








 

Financial income


12 




12 

 

Financial expense


(14)




(14)

 

 








 

Net financing expense


(2)




(2)

 

 








 

Share of post-tax results of joint ventures


14 




14 

 

 








 

Profit/(loss) before income tax

3

327 


(72)



255 

 

 








 

Income tax


(67)


(2)



(69)

 

 








 

Profit/(loss) for the year from continuing








 

operations


260 


(74)



186 

 

 








 

Loss for the year from discontinued








 

operations

6

(8)


-



(8)

 

 








 

Profit/(loss) for the year


252 


(74)



178 

 

 








 

Attributable to:








 

Equity holders of the parent







179 

 

Non-controlling interests







(1)

 

 








 

 







178 

 

 








 

 








 

 








 

 








 

Basic earnings/(loss) per share:

7







 

Continuing operations


89.0p 





63.8p 

 

Discontinued operations


(2.7)p





(2.7)p

 

 








 

 


86.3p 





61.1p 

 

 








 

Diluted earnings/(loss) per share:

7







 

Continuing operations


87.2p 





62.5p 

 

Discontinued operations


(2.7)p





(2.7)p

 

 








 

 


84.5p 





59.8p 

 


 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME




 



Six months


Six months


Year



ended


ended


ended



30 June


30 June


31 December



2014


2013


2013



£ million


£ million


£ million

 







Profit for the period


44 


91 


178 

 







Other comprehensive income:







 







Items that may be reclassified to profit and loss:







 







       Exchange movements on translation of







       foreign subsidiaries


(17)


25 


(70)

 







       Net loss on hedges of net







       investment in foreign subsidiaries


(1)


(1)


(1)

 







       Tax on exchange movements




 







       Cash flow hedges:







      Effective portion of changes in fair value


(2)


(1)


      Tax on effective portion of changes in fair value




(1)

      Transferred to the income statement




 

 


 

(19)


 

23 


 

(67)

Items that will not be reclassified to profit and loss:







 







      Actuarial gains on defined benefit pension schemes


 



40 

 







      Tax on actuarial gains




(20)

 

 


 


 


 

20 

 







 







Other comprehensive income

(19)


23 


(47)

 







Total comprehensive income

25 


114 


131 

 







Attributable to:







  Equity holders of the parent


25 


115 


133 

  Non-controlling interests



(1)


(2)

 







Total comprehensive income

25 


114 


131 

 



CONDENSED CONSOLIDATED BALANCE SHEET


 

 

 

 

 

 


 

30 June 2014

 

30 June 2013

 

31 December 2013

 

Note

£ million

 

£ million

 

£ million

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

39 

 

42 

 

39 

Intangible assets

9

903 

 

966 

 

907 

Interests in joint ventures

 

49 

 

45 

 

52 

Derivative financial instruments

 

 

 

Retirement benefit assets

 

102 

 

85 

 

102 

Other receivables

10

24 

 

27 

 

24 

Deferred tax assets

 

38 

 

54 

 

35 


 

 

 

 

 

Total non-current assets

 

1,156 

 

1,219 

 

1,160

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Inventories

 

 

 

Trade and other receivables

 

994 

 

1,104 

 

956 

Derivative financial instruments

 

 

 

Current tax receivable

 

13 

 

 

10 

Bank deposits (more than three months)

 

22 

 

19 

 

18 

Cash and cash equivalents (excluding bank overdrafts)

176 

 

196 

 

232 

 

 

 

 

 

 

Total current assets

 

1,214 

 

1,333 

 

1,224 

 

 

 

 

 

 

 

Total assets

 

2,370 

 

2,552 

 

2,384 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

Bank loans and overdrafts

 

(170)

 

(190)

 

(129)

Trade and other payables

 

(846)

 

(904)

 

(801)

Derivative financial instruments

 

(6)

 

(3)

 

(1)

Current tax payable

 

(74)

 

(63)

 

(73)

 

 

 

 

 

 

 

Total current liabilities

 

(1,096)

 

(1,160)

 

(1,004)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Trade and other payables

10

(11)

 

(10)

 

(11)

Retirement benefit liabilities

 

(63)

 

(99)

 

(62)

Deferred tax liabilities

 

(13)

 

(10)

 

(20)

Provisions

11

(155)

 

(173)

 

(163)

 

 

 

 

 

 

Total non-current liabilities

 

(242)

 

(292)

 

(256)

 

 

 

 

 

 

Total liabilities

 

(1,338)

 

(1,452)

 

(1,260)

 

 

 

 

 

 

Net assets

 

1,032 

 

1,100 

 

1,124 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Share capital

 

152 

 

152 

 

152 

Share premium account

 

101 

 

101 

 

101 

Hedging and translation reserves

 

14 

 

122 

 

33 

Capital redemption reserve

 

34 

 

34 

 

34 

Retained earnings

 

729 

 

688 

 

802 

Total equity attributable to equity holders

 

 

 

 

of the parent

 

1,030 

 

1,097 

 

1,122 

 

 

 

 

 

 

 

Non-controlling interests




 


 


 



Total equity


1,032 


1,100 


1,124 



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 2014


152 


101 



32 


34 


802 


1,122 



1,124 




















Profit for the period







44 


44 



44 

 



















Exchange movements



















on translation of



















foreign subsidiaries





(17)




(17)



(17)

Net loss on hedges of



















net investment in



















foreign subsidiaries





(1)




(1)



(1)

Effective portion of



















changes in fair value



















of cash flow hedges




(2)





(2)



(2)

Tax on effective portion



















of changes in fair



















value of cash flow



















hedges










 






































Other comprehensive



















income for the period




(1)


(18)




(19)



(19)




















Total comprehensive



















income for the period




(1)


(18)



44 


25 



25 




















Dividends







(124)


(124)



(124)

Equity settled share-



















based payments










Utilisation of treasury



















shares





























As at 30 Jun 2014


152 


101 



14 


34 


729 


1,030 



1,032 

 



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

 











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 

 



CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 

 

 

 

 

Six months

 

 

 

 

 

Six months

 

ended

 

Year

 

 

 

ended

 

30 June

 

ended

 

 

 

30 June

 

2013

 

31 December

 

 

 

2014

 

(Restated)

 

2013

 

 

 

£ million

 

£ million

 

£ million

Cash flow from operating activities

 

 

 

 

 

 

 

Profit before income tax from continuing operations

 

 

83 

 

118 

 

255 

Loss before income tax from discontinued operations

 

 

(18)

 

(6)

 

(16)

 

 

 

 

 

 

 

 

Profit before income tax

 

 

65 

 

112 

 

239 

Financial income

 

 

(5)

 

(3)

 

(12)

Financial expense

 

 

 

 

14 

Share of post-tax results of joint ventures

 

 

(6)

 

(1)

 

(14)

Intangible amortisation

 

 

21 

 

22 

 

47 

Depreciation

 

 

 

 

12 

Loss on disposal of businesses

 

 

28 

 

 

Difference between contributions to retirement benefit

 

 

 

 

 

 

 

schemes and current service cost

 

 

 

 

Profit on disposal of property, plant and equipment

 

 

-  

 

(1)

 

(1)

Equity settled share-based payments

 

 

 

 

14 

 

 

 

 

 

 

 

 

 

 

 

118 

 

156 

 

305 

(Increase)/decrease in inventories

 

 

(2)

 

(2)

 

(Increase)/decrease in trade and other receivables

 

 

(42)

 

(89)

 

66 

Decrease in trade and other payables and provisions

 

 

(63)

 

(24)

 

(80)

 

 

 

 

 

 

 

 

Cash generated from operations

 

 

11 

 

41 

 

292 

Tax paid

 

 

(25)

 

(29)

 

(52)

 

 

 

 

 

 

 

 

Net cash flow from operating activities

 

 

(14)

 

12 

 

240 

 

 

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

 

 

Acquisition of businesses (net of cash acquired)

 

 

 

- 

 

(20)

Funding of joint ventures

 

 

(1)

 

(5)

 

(7)

Purchase of property, plant and equipment

 

 

(7)

 

(4)

 

(10)

Purchase of intangible assets

 

 

(12)

 

(7)

 

(13)

Movement in bank deposits (more than three months)

 

 

(4)

 

(2)

 

(1)

Disposal of businesses (net of cash disposed of)

 

 

(1)

 

(1)

 

(4)

Disposal of joint ventures

 

 

(21)

 

 

Disposal of property, plant and equipment

 

 

 

1 

 

Interest received

 

 

 

- 

 

Dividends received from joint ventures

 

 

 

5 

 

Amounts paid on maturity of net investment hedges

 

 

 

(3)

 

(3)

 

 

 

 

 

 

 

 

Net cash flow from investing activities

 

 

(38)

 

(16)

 

(40)

 

 

 

 

 

 

 

 

Net cash flow before financing activities

 

(52)

 

(4)

 

200 

 

 

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

 

 

Proceeds from/(repayments of) other borrowings

 

 

50 

 

35 

 

(30)

Interest paid

 

 

(4)

 

(2)

 

(11)

Dividends paid

 

 

(40)

 

(36)

 

(108)

Acquisition of shares for cancellation

 

 

 

(45)

 

(45)

Cash flows in respect of treasury shares (net)*

 

 

 

5 

 

Cash flows in respect of facility arrangement fees

 

 

(5)

 

 

Acquisition of shares by trustees of the

 

 

 

 

 

 

 

Performance Share Plan

 

 

 

(2)

 

(2)

 

 

 

 

 

 

 

 

Net cash flow from financing activities

 

 

 

(45)

 

(189)

 

 

 

 

 

 

 

 

(Decrease)/increase in cash and cash equivalents

 

 

(46)

 

(49)

 

11 

Cash and cash equivalents as at the beginning of the period

 

 

223 

 

232 

 

232 

Exchange (losses)/gains on cash and cash equivalents

 

 

(1)

 

8 

 

(20)

 

 

 

 

 

 

 

 

Cash and cash equivalents as at the end of the period

 

 

176 

 

191 

 

223 

 

 

 

 

 

 

 

 




CONDENSED CONSOLIDATED CASH FLOW STATEMENT (continued)

 



30 June


30 June


31 December



2014


2013


2013



£ million


£ million


£ million

Cash and cash equivalents consist of:







Cash at bank and in hand


126 


131 


153 

Bank deposits (less than three months)


50 


65 


79 

Bank overdrafts



(5)


(9)








Cash and cash equivalents as at the end of the period


176 


191 


223 

Bank deposits (more than three months)


22 


19 


18 

Bank loans


(170)


(185)


(120)

 







Net cash as at the end of the period


28 


25 


121 

 

*Payments received from SAYE option holders on exercise of options of £5 million (six months ended 30 June 2013: £5 million; year ended 31 December 2013: £7 million).

 

NOTES TO THE ACCOUNTS

 

1.      CORPORATE INFORMATION

 

The interim condensed accounts of AMEC plc for the six months ended 30 June 2014 were authorised for issue in accordance with a resolution of the directors on 7 August 2014.

 

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 2013.

 

The comparative figures for the year ended 31 December 2013 are not the group's statutory accounts for that financial year but are an extract from those accounts.  The statutory accounts for the year ended 31 December 2013 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 2013 were prepared in accordance with IFRS as adopted by the EU.  There are no IFRS, IAS amendments or IFRIC interpretations effective for the first time this financial year that have had a material impact on the group. 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.

 

For a number of years, AMEC had been taking a more selective approach to the bidding of contracts in the former Power and Process (P&P) division in the UK, most notably in the area of conventional power. During the second half of 2013, all revenue-generating activity ceased. The UK conventional power business was considered to be a major line of business and is now reported as a discontinued business and the six months ended 30 June 2013 have been restated accordingly.  The impact of this restatement for the six months ended 30 June 2013 has been an increase in profit before taxation from continuing operations of £1 million and no impact in the income tax charge resulting in a higher profit after tax from continuing operations of £1 million.  The impact also increases the loss for the year from discontinued operations by £1 million.  There is no impact on the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity or the condensed consolidated balance sheet.

 

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.

 

 

NOTES TO THE ACCOUNTS (continued)

 

2.      PREPARATION OF INTERIM RESULTS (continued)

 

Basis of preparation (continued)

 

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 the appropriate and practical 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.Known and reasonably likely legal claims or actions for which a provision has not been established are not expected to have a material impact on the group. The possibility of other claims being made in the future is considered by AMEC, but in general their occurrence or outcome cannot be predicted within any degree of certainty.

 

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 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 2014 the group held net cash of £28 million and had committed and available banking facilities of £477 million.



 

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. The group's results are reported on a geographic basis.  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 6 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



2014


2013


2013


2014


2013


2013





(Restated)


 

 



(Restated)


 



£ million


£ million


£ million

 

£ million


£ million


£ million

Class of business:













Americas


1,060 


1,154 


2,247 


102 


113 


241 

Europe


545 


589 


1,227 


45 


40 


93 

Growth Regions


279 


265 


536 


17 


16 


33 

Investment Services







11 
















1,887 


2,010 


4,016 


168 


177 


378 

Internal revenue


(29)


(19)


(42)




















External revenue


1,858 


1,991 


3,974 




















Corporate costs1








(16)


(18)


(35)

EBITA2








152 


159 


343 

Net financing expense4








(2)


(4)


(11)

Adjusted profit before income tax








 

150 


 

155 


 

332 

Tax on results of joint













ventures5








(2)


(1)


(5)









148 


154 


327 














Intangible amortisation








(21)


(22)


(47)

Exceptional items








(44)


(14)


(25)

 













Profit before income tax








83 


118 


255 

 

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

2   EBITA is earnings from continuing operations before net financing expense, tax, intangible amortisation and pre-tax exceptional items of £141 million (six months ended 30 June 2013: £154 million; year ended 31 December 2013: £315 million), but including joint venture EBITA of £11 million (six months ended 30 June 2013: £5 million; year ended 31 December 2013: £28 million).

3   Research and development government credits of £14 million (six months ended 30 June 2013: £3 million; year ended 31 December 2013: £22 million) were recognised during the period.

4   Net financing expense includes AMEC's share of net interest payable of joint ventures.

5   The 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









2014


2013


2013





 


 

 

£ million


£ million


£ million





 


 

 

 

 

 

 

 

EBITA








11 



28 

Net financing expense








(3)


(3)


(9)

Tax








(2)


(1)


(5)
























14 














 



 

NOTES TO THE ACCOUNTS (continued)

4.      AMORTISATION AND EXCEPTIONAL ITEMS

 



Six months


Six months





ended


ended


Year ended



30 June


30 June


31 December



2014


2013


2013 



£ million


£ million


£ million 








Continuing operations:







      Administrative expenses - exceptional items


(29)


(8)


(18)

      Administrative expenses - intangible amortisation


(21)


(22)


(47)



(50)


(30)


(65)

Loss on business disposals and closures


(15)


(6)


(7)



(65)


(36)


(72)

Taxation credit/(charge) on exceptional items of continuing operations




(6)

Taxation credit on intangible amortisation




20 

Taxation charge on restructuring




(16)




11 


(2) 

Post-tax exceptional amortisation and exceptional items







of continuing operations


(58)


(25)


(74)

Exceptional items of discontinued operations (post-tax)


(7)


(4)


Post-tax amortisation and exceptional items


(65)


(29)


(74)

 








Post-tax exceptional items


(50)


(13)


(47)

Post-tax intangible amortisation


(15)


(16)


(27)



(65)


(29)


(74)

 

Post-tax exceptional items are further analysed as follows:

 



 

Six months ended 30 June 2014


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

(20)



(15)


(29)


(44)

Discontinued operations

(8)



(8)



(8)

Loss before tax

(28)



(23)


(29)


(52)

Tax





(Loss)/profit after tax

(26)



(21)


(29)


(50)











 

During the six months ended 30 June 2014, the group disposed of its investment in the Lancashire Waste project at a loss of £20 million mainly arising from a reverse premium payable on exit. This combined with additional indemnity provisions and costs of £8 million associated with businesses sold in prior years (and classified as discontinued) to give a pre-tax loss on disposal of £28 million.

 

There was a credit of £5 million from the release of a provision no longer required in respect of a business closed in a prior year (and classified as continuing).  Other exceptional items of £29 million includes transaction costs of £26 million relating to the proposed acquisition of Foster Wheeler AG of which £9 million has been paid in cash during the period.

 



 

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)











 



 

NOTES TO THE ACCOUNTS (continued)

 

4.      AMORTISATION AND EXCEPTIONAL ITEMS (continued)

 

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.

 

Year ended 31 December 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


(7)


(7)


(18)


(25)

Discontinued operations

(6)



(6)



(6)

Loss before tax

(6)


(7)


(13)


(18)


(31)

Tax charge on restructuring




(16)


(16)

Tax on exceptional items




(6)


Loss after tax


(7)


(7)


(40)


(47)

 

Additional indemnity provisions of £10 million and costs in respect of businesses sold in prior years (and classified as discontinued) were offset by the release of a £5 million litigation provision and indemnity provisions no longer required, and give a pre-tax exceptional loss on disposals of £6 million.

 

There were additional litigation provisions of £9 million offset by releases of £2 million in respect of businesses closed in a prior year and classified as continuing.

 

Exceptional costs of £18 million in continuing operations includes £14 million restructuring costs associated with the management reorganisation into geographic business units and transaction costs of £4 million which, in line with IFRS 3, are charged to the income statement.

 

A tax provision of £16 million has been established for potential withholding tax following a group restructuring that resulted in a significant amount of cash being repatriated from foreign subsidiaries.

 

5.      INCOME TAX

 

The group's effective tax rate in six months ended 30 June 2014 for the continuing businesses (including tax attributable to joint venture interests) but before exceptional items and intangible amortisation was 22 per cent (six months ended 30 June 2013: 22 per cent).  The forthcoming reductions in the rate of UK corporation tax have all been substantively enacted.  The effective tax rate for the full year is expected to be 22 per cent.

 


 

NOTES TO THE ACCOUNTS (continued)

 

6.      LOSS FOR THE PERIOD FROM DISCONTINUED OPERATIONS

 

Discontinued operations represent the residual assets and retained obligations in respect of businesses sold in prior years, as well as the UK conventional power business which was discontinued in the second half of 2013 (see note 1 for further details).

 

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



Six months 30 June 2014


Six

months

30 June

2013

(Restated)


Year ended 

31 December 2013



£ million


£ million


£ million

Revenue




15 

Cost of sales and net operating expenses


(10)


(8)


(25)

Loss before exceptional items and attributable tax


(10)


(1)


(10)

Attributable tax



-




(8)


(1)


(8)

Loss on disposal


(8)


(5)


(6)

Tax on disposals











Loss for the year from discontinued operations


(15)


(5)


(8)

 

 

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 and those held in treasury by the company. 

 


Six months ended 30 June 2014


Six months ended 30 June 2013


Year ended 31 December 2013






















Weighted






Weighted





Weighted






average






average


Earnings



average






shares


Earnings


Earnings


shares


per share



shares


Earnings


Earnings


number


per share


(Restated)


number


(Restated)



number


per share


£ million


 million


pence


£ million


 million


pence



 million


pence


















Basic earnings from



 


 




 


 



 


 

continuing operations

59 


294 


20.2 


97


294 


32.8 



293 


63.8 




 


 




 


 



 


 

Share options



(0.1)


-



(0.1)




(0.4)






 






 



 


 

Employee share and





 






 



 


 

incentive schemes



(0.3)


-



(0.5)




(0.9)




 


 




 


 




 


 

Diluted earnings from



 


 




 


 



 


 

continuing operations

59 


300 


19.8 


97


299 


32.2 



299


62.5 




 


 




 


 




 


 

 

 


Six months ended 30 June 2014


Six months ended 30 June 2013


Year ended 31 December 2013




Weighted






Weighted






Weighted






average






average


Earnings




average






shares


Earnings


Earnings


shares


per share




shares


Earnings


Earnings


number


per share


(Restated)


number


(Restated)


Earnings


number


per share


£ million


 million


pence


£ million


 million


pence


£ million


 million


pence




 


 




 


 




 


 

Basic loss



 


 




 


 




 


 

from discontinued



 


 




 


 




 


 

operations

(15)


294 


(5.2)


(5)


294 


(1.6)


(8)


293 


(2.7)




 


 




 


 




 


 

Share options
























 



Employee share and















 



incentive schemes



0.1 










 


 




 


 




 


 

Diluted loss from discontinued



 


 




 


 




 


 

operations

(15)


300 


(5.1)


(5)


299


(1.6)


(8)


299 


(2.7) 

 

 

 

NOTES TO THE ACCOUNTS (continued)

 

7.      EARNINGS PER SHARE (continued)

 

Basic and diluted earnings from continuing operations is calculated as set out below:

 



Six months


Six months


Year



ended


ended


ended



30 June


30 June


31 December



2014


2013


2013





(Restated)


 



£ million


£ million


£ million





 


 

Profit for the period from continuing operations


59


96


186

Loss attributable to non-controlling interests


-


1


1








Basic and diluted earnings from continuing operations


59


97


187

 

In order to appreciate the effects on the reported performance of intangible amortisation and exceptional items, additional calculations of earnings per share are presented.

 



Six months ended 30 June 2014


Six months ended 30 June 2013


















Weighted






Weighted







average






average


Earnings





shares


Earnings


Earnings


shares


per share



Earnings


number


per share


(Restated)


number


(Restated)



£ million


 million


Pence


£ million


 million


pence





 


 




 


 

Basic earnings from continuing operations


59


294


20.2 


97


294


32.8 

Exceptional items (post-tax)


43


-


14.6 


9


-


3.1 

Amortisation (post-tax)


15


-


5.1 


16


-


5.4 





 


 




 


 

Basic earnings from continuing operations













before amortisation and exceptional items


117


294


39.9 


122


294


41.3 

Share options


-


2


(0.2)


-


1


(0.1)

Employee share and incentive schemes


-


4


(0.6)


-


4


(0.6)














Diluted earnings from continuing operations













before amortisation and exceptional items


117


300


39.1 


122


299


40.6 

 

 




Year ended 31 December 2013














Weighted








average


Earnings




Earnings


shares


per share