RNS Number:2068J
Amey PLC
26 March 2003
26 MARCH 2003
For immediate release
AMEY plc
Preliminary Results for the year ended 31 December 2002
Focus on core business following fundamental restructuring
Key financials
* Group turnover up 10% to #867.5 million
* EBIT (before exceptional items) of #9.6 million (2001 - loss #2.5
million)
* EBITA (before exceptional items and FRS 17) from core continuing
businesses up to #26.9 million (2001 - #6 million)
* Exceptional charges of #110.2 million, resulting in a post-tax loss of
#118.5 million
* Results consistent with recent trading statements
* Positive net cash inflow from core continuing operations
* Net debt at 31 December 2002 #150.8 million
* Option to take up equity position in Tube Lines
* Forward order book of #3.7 billion - workload for 2003 substantially
secured
Results of the restructuring exercise
* Bank facilities secured until July 2004
* Focus on core strengths: Transport and BPO Services
* Reduced cost base
* Strict cash flow management
Ian Robinson, Chairman, commented:
The year 2002 proved a challenging twelve months for Amey. A major restructuring
of the Company, its management, business operations and financing arrangements
was required. This corporate reorganisation is now substantially complete with
Mel Ewell, formerly Chief Operating Officer, taking up the position of Chief
Executive in February. Amey's business operations are now focused on Transport
and BPO Services, commanding a significantly reduced cost base. During 2002 we
continued to deliver quality services to our customers whose support we continue
to enjoy. I am pleased to report that our core businesses have experienced some
positive momentum since the outset of 2003. Our workload for the current year is
substantially secured and the Company is in significantly better shape to
capitalise on future opportunities."
For further information please contact:
Anthony Cardew / Nadja Vetter, CardewChancery T: 020 7930 0777
PRELIMINARY STATEMENT OF THE RESULTS FOR THE YEAR ENDED 31 December 2002
The Preliminary Statement starts this year with a detailed Financial Review
followed by the Chief Executive's Report.
FINANCIAL REVIEW
2002 was a year during which Amey went through considerable change and
restructuring. A strategic review announced in September 2002 concluded that the
Group should focus on its core businesses and discontinue activities in areas
where performance was poor. As a result a number of businesses and activities
were discontinued during the year, and the decision was taken to wind down or
dispose of a number of others.
Overall, core activities performed well and the results were in line with
statements made in late 2002 and in February 2003.
Operating Results including Exceptional Items
The results for the year are summarised as follows
#m 2002 2001
Turnover (Incl JV's) 917.1 831.4
Joint Venture Turnover (49.6) (44.9)
Group Turnover 867.5 786.5
Loss before interest tax (111.9) (2.5)
Exceptional items (pre-tax) (121.5) -
EBIT pre-exceptional items 9.6 (2.5)
The rest of this review deals separately with pre-exceptional and exceptional
items.
Operating Results excluding Exceptional Items
The results for the year are complicated by the need to separate discontinued
activities (those already terminated) from continuing activities, which in turn,
are divided between core continuing activities and others that are in the course
of being discontinued. The table below sets out which businesses fall into which
categories and the turnover and adjusted EBIT and EBITA figures for each
category.
Continuing Activities Discontinued
Core Being Activities
Discontinued
Transport Vectra Vectra N Jones
BPO Services BCN ARMS
Construction ATS
TCL PFI Portfolio Total
Turnover (incl 2002 770.7 88.1 58.3 917.1
JV's)
2001 613.3 149.7 68.4 831.4
EBIT * 2002 8.4 (11.6) 12.8 9.6
Amortisation 2002
goodwill and
FRS 17charge 18.5 0.7 0.3 19.5
EBITA ** 2002 26.9 (10.9) 13.1 29.1
2001 6.0 (14.0) 22.5 14.5
* Pre-exceptional items
** Pre-exceptional items, goodwill and FRS 17
Amey's core businesses delivered strong revenue growth and margins. Operational
contracts delivered increased turnover to #770.7 million (up from #613.3 million
in 2001) and EBITA before exceptionals of #26.9 million (compared with #6.0
million in 2001).
The analysis that follows reflects the revised split of the businesses as they
are currently being managed following the implementation of the strategic
review.
Core Continuing Activities
The core continuing activities are the Transport and BPO Services businesses.
Within the Transport business are the Rail, Highways and Fleet Services
operations whilst BPO Services includes all of our (non-transport) public and
private sector outsourcing contracts. The segmental analysis of these activities'
results is as follows:
EBITA* - Core Continuing Activities
#m 2002 2001
Transport 46.1 16.1
BPO Services 6.5 8.6
Central (25.7) (18.7)
TOTAL 26.9 6.0
* pre-exceptional items, goodwill amortisation and FRS17 charges
Continuing Activities in the course of being discontinued
Businesses in the course of being discontinued include the construction
activities which are being run down as contracts come to an end, the Tramlink
Croydon (TCL) joint venture where the extended banking standstill arrangements
at TCL have irrevocably changed the nature of the relationship between the
Company and TCL, and two businesses which the Company is seeking to sell. The
companies for which sale discussions are ongoing are Vectra, the environmental
services consultancy subsidiary and BCN Data Systems, a joint venture company
providing automated meter reading.
The results of these activities are summarised as follows:
EBITA* - Activities Being Discontinued
#m 2002 2001
Construction (5.3) (12.0)
Croydon Tramlink JV 0.2 0.1
BCN and Vectra (5.8) (2.1)
TOTAL (10.9) (14.0)
* pre-exceptional items, goodwill amortisation and FRS 17
Discontinued Activities
Discontinued businesses include the elements of the Amey Technology Services
division which have been sold or closed down in the year (Vectra N. Jones,
disposed of in March 2002, Amey Resource Management Solutions, disposed of in
December 2002, and the divisional head office closed in September 2002) and the
portfolio of PFI investments sold in March 2003. These are regarded as having a
material effect on the nature and focus of the Company's operations
notwithstanding the likelihood of the Company making other PFI investments in
future.
The results of these businesses and the loss on sale of the businesses is
summarised as follows:
EBITA*in 2002 Loss on sale
or to date of sale
#m #m
PFI Investments & subsidiaries 16.6 -
Amey Technology Services (3.5) (7.9)
TOTAL 13.1 (7.9)
* pre-exceptional items, goodwill amortisation and FRS 17 changes
The joint venture with Gallagher Developments announced in last year's annual
report has been terminated during the second half of the year with no net cash
or book profit or loss to the Company.
Exceptional Items
The results for the year are also dominated by the following exceptional charges
made in arriving at operating profit but which are excluded from the tables
above and are summarised below.
Continuing
Note Core Being Discontinued Discontinued Total
Current asset 1 (4.9) (69.9) - (74.8)
write downs
Dispute 2 (6.7) - - (6.7)
settlements
Investment 3 - (19.5) - (19.5)
write downs
Advisers fees (8.0) - - (8.0)
relating to
covenant
renegotiation 4
Strategic (3.7) - (0.9) (4.6)
review and
restructuring
costs 5
(23.3) (89.4) (0.9) (113.6)
Loss on sale of - - (7.9) (7.9)
subsidiaries
TOTAL (pre-tax) (23.3) (89.4) (8.8) (121.5)
Taxation 2.4 8.8 0.1 11.3
TOTAL (post-tax) (20.9) (80.6) (8.7) (110.2)
These exceptional items are explained in more detail as follows:
(1) The biggest items are the write downs of construction work in
progress balances and forward loss provisions totalling #69.9 million for which
previous optimism as to the recovery of these items or ability to mitigate
future losses has not been borne out in practice. The principal contracts are
those relating to the Croydon Tramlink, Thurleigh Detention Centre, North
Birmingham Mental Health Trust and M6 projects. The main events that supported
these revised judgments were the poor trading of the Croydon Tramlink concession
company and the failure to secure claims revenues from the Thurleigh Detention
Centre contract. In addition, following the decision to sell Amey's equity
investments to Laing Investments, the Company took the prudent view to write
down outstanding construction claims relating to PFI contracts, even though
Amey's ability to pursue such claims still stands.
Included in this write down is an amount of #11 million relating to a number of
smaller contracts for which balances which had been on the balance sheet for a
long time and have now been written down to nil. The passage of time without
recovery necessitated a more cautious judgment regarding recoverability to be
taken.
The Croydon Tramlink construction project has been written down to an amount of
#3.9 million, being the amount of an anticipated insurance recovery.
No further losses are expected from construction projects and no new contracts
are being sought.
The Company will continue to pursue recoveries wherever possible.
The core continuing current asset write downs relate primarily to a reassessment
of the period over which the Group would have the benefits of certain operating
leases.
(2) The core continuing dispute settlements relate to the settlement of
two contractual disputes in the Transport and BPO Services businesses amounting
to #3 million and #3.7 million respectively.
(3) The second biggest category of exceptional charges relates to
investment write-downs of #19.5 million, comprising write-downs of #8.4 million
in respect of BCN Data Systems to a carrying value of #7 million and the #11.1
million write down of the Group's investment in Tramlink Croydon Ltd (TCL) to
#nil. The Group's share of that Company's net liabilities have not been brought
into account as it is considered that the Company is in the control of its
bankers following the banking standstill arrangements between TCL and its
bankers.
(4) The costs of the strategic review announced in September along with
associated restructuring costs are shown within core continuing activities.
(5) The loss on sale of subsidiaries comprises the losses on the sales of
Amey Resource Management Solutions (ARMS) and Vectra N. Jones .
Adverse developments in 2002
As stated earlier, the core Amey business performed well, but the Group's
results were adversely affected by a number of major events that severely
strained the Group's financial resources. These can be summarised as follows:
Discontinued and being Discontinued Operations:
Construction - as detailed under the section entitled Exceptional Items, the
exit from the Group's construction activities generated significant losses.
Technology Services - The decision was taken during 2002 to wind
down this Division, as it was exposed to difficult market conditions and a
downturn in IT and technology activity. Some of its activities have been merged
with appropriate core operational units, whilst others were discontinued in
2002, and a number of viable but non-core businesses have been or are in the
process of being sold.
Investment underperformance: As stated under the Exceptional Items section of
this document, during 2002, two significant investments for the Group, Croydon
Tramlink, where Amey has a 50% stake, and BCN - a business using fixed network
wireless technology for remote monitoring applications - in which the Group
holds a 50% stake, continued to demonstrate uncertain future investment returns
and the Group wrote down their value to appropriate levels.
Working capital requirements increases: Working capital requirements to support
business winning activity were much higher than planned. This was caused by
longer than anticipated bid timescales and the loss of major bids that were
expected to be won. Significant write offs were taken in 2002 to account for bid
costs associated with the unsuccessful Redcar & Cleveland and Northampton &
Milton Keynes bids, the withdrawal from both the Manchester and Leeds Light Rail
schemes, and an enterprise aimed at developing major new infrastructure in parts
of the UK, the Millennium Projects Partnership. In addition, extensive capital
expenditure, mainly associated with investment relating to the new Shared
Service Centre for the Group was undertaken during 2002, and this further
stretched cash resources.
The delay in the financial close of the LUL PPP transaction: as a
member of the Tube Lines consortium, the Group was awarded the 30 year
concession from London Underground Limited to provide full infrastructure
services for the Jubilee, Northern and Piccadilly underground lines. This
contract was expected to be completed in early 2002. In the end, commercial
close was reached in May 2002, but financial close was delayed until December.
As a result, it was necessary for Amey to support Tube Lines from its own
resources for significantly longer than anticipated, revenues expected to flow
after the contracts were signed did not materialise, and the recovery of all
outstanding development costs and fees was delayed. In the end some #25 million
was recovered when the contract reached financial close in December 2002, (along
with a further #7 million in escrow in relation to the option to take up the
Group's interest in the Tube Lines Consortium) but the protracted delay
associated with such a substantial cash receipt had a detrimental effect in
Amey's cash position during 2002.
Cash Flow
The cash flow statement is summarized as follows:
#m 2002 2001
(7.2) 26.7
Net cash from operating activities
Returns on investments and servicing of finance (10.0) (8.2)
Taxation - (2.9)
Capital Expenditure (11.5) (18.6)
Acquisitions and disposals (10.9) (17.3)
Dividends (5.6) (8.0)
Cash outflow before use of liquid resources and financing (45.2) (28.3)
The cash flow statement shows a net cash outflow before financing of some #45.2
million. Of the cash outflow from operations of #7.2 million some #14 million
relates to the net receipts on the London Underground PPP, #5 million relates to
abortive bid costs on the two unsuccessful local authority BPO contracts
announced as such at the end of 2002, and #31 million related to the winding
down of construction activities. Excluding these items the net cash inflow from
operating activities is #14.8 million.
The net cash outflow on capital expenditure reflects acquisition of Fleet
Services assets (#7.2 million), investing in internal infrastructure and systems
(principally the Shared Service Centre) (#13.4 million) and other assets (#6.0
million) offset by sales to leasing companies and other disposals of #15.7
million.
The other principal outflows relate to the net joint venture investments (Amey
Tramlink #7 million, BCN #2.1 million) and PFI portfolio of #1.9 million.
Liquidity, Net Debt and Financing
The financing of the above cash outflow is summarised as follows:
#m 2002 2001
Financing
Issue of shares 1.3 0.2
Long term loan finance 90.6 28.2
Repayment of short term finance (1.0) (1.4)
Capital element of finance lease (4.0) (4.0)
86.9 23.0
(Decrease)/Increase in cash 41.7 (5.3)
The last five months have been dominated by extended discussions with our
bankers following the acknowledgement by the Company that it had breached
various of its information covenants and expected various financial breaches at
the year end. Waivers of the breaches were achieved throughout this period and
on 26 February we announced that we had negotiated revised banking facilities
totalling approximately #220 million, at largely unchanged interest rates,
albeit with additional fees on commitment and exit, and warrants amounting to
approximately 5% of issued capital, extending to 30 June 2004. These came into
effect on 14 March following the shareholders' approval of the sale of the
portfolio of PFI investments to Laing Investments.
This achievement allows the Company a stable banking platform for going forward.
The table below shows net debt at the year end was #150.8 million compared with
#106.4 million at the previous year end. However, these figures do not give a
realistic guide to the average net debt carried by the Group as is evident from
the interest costs shown in the profit & loss account. Average net debt for the
second half year was circa #190 million.
#m 31/12/2002 31/12/2001
Cash at bank 76.7 35.0
Other loans (200.7) (110.0)
Finance leases (8.8) (12.4)
Net debt with recourse to parent company (132.8) (87.4)
Non recourse loans to PFI subsidiary (18.0) (19.0)
TOTAL (150.8) (106.4)
Accounting Policies
Following the very significant changes to accounting policies in the 2001
financial statements this year has seen little change in the way the financial
statements have been prepared. The only change of any significance has been the
modification of our treatment of PFI bid costs to bring the policy adopted last
year in anticipation of the expected UITF abstract on Pre-contract costs into
line with the subsequently issued UITF 34 . This has involved our recognising on
the balance sheet bid costs where "it is virtually certain that a contract will
be obtained and the contract is expected to result in future net cash inflows
with a present value greater than the amounts recognised as an asset". In most
cases this means recognising on the balance sheet costs incurred after we have
achieved preferred bidder status. The effect of this modification has been to
increase net assets at 31 December 2002 and reduce the loss for the year by #4.0
million. The impact on the prior year is immaterial.
Having voluntarily adopted FRS 17 (Retirement Benefits) in 2001 the Company is
unable to revert to the SSAP 24 treatment of pension costs notwithstanding that
the compulsory date for full adoption of FRS17 has been deferred to 2005 and the
overwhelming majority of listed companies continue to adopt SSAP 24.
Taxation
The taxation charge against ordinary activities reflects a 30% charge on the
profit from ordinary activities before goodwill amortisation and the tax credit
against exceptional activities reflects the tax losses available to be used
against anticipated future taxable profits carried forward as deferred tax
assets as required by FRS 19.
Disposals
During the year the Company disposed of its subsidiaries Vectra N Jones and Amey
Resource Management Solutions. These sales resulted in a net loss on sale of
#7.9 million. Subsequent to the year end the Company disposed of its interests
in a portfolio of PFI investments for net proceeds of #25 million.
Goodwill
A thorough review of the carrying value of goodwill resulted in a write down of
#8.4 million in respect of the BCN Data Systems investment to a carrying value
of #7 million. Expected cash flows relating to the other goodwill carried on the
balance sheet (principally for the Comax and Crown Communications businesses)
are sufficient to support those carrying values. At the time of the acquisition
of Comax the Group made clear that one of the primary reasons for the purchase
was to enable the Group to develop its support services business offering.
Therefore, when assessing the Comax goodwill, we have considered cash flows from
not only the original Comax contracts but also those from other BPO contracts
that use the skills and expertise that the Comax acquisition brought to the
Group.
Pensions
The Group operate a number of defined benefit schemes. Following the
implementation of FRS 17 last year the Group has recognised net pension deficits
held on the balance sheet of #48.5 million. During the year the increase in the
overall net liability from #1.3 million reflected adverse market conditions.
The underlying investment strategies of the Trustees of the funds are
predominantly based on investment in listed equities following the advice of
scheme actuaries given in the light of the profile of scheme members.
New contract awards
During the year, a number of major contracts were won by Amey's core businesses,
with potential future revenues in excess of #1.25 billion. In addition, Amey
achieved financial close of the LUL PPP transaction with full recovery of bid
costs. As a result, Amey holds an option to fully take up its equity position in
the concession company, Tube Lines, until the end of June 2003. The Group is
currently actively working towards making the necessary arrangements that will
allow it to exercise this option, and in this way secure valuable long-term
revenues in excess of #6 billion over the period of the concession.
CHIEF EXECUTIVE'S REPORT
Actions taken to refocus the Group
In the face of severe difficulties arising in 2002, the Board agreed that
radical measures were required and action plans have been initiated from the
third quarter of 2002 onwards in the following areas:
Concentrate on core businesses and divest non core activities:
* Amey has been re-organised around two strong and focused businesses:
Transport (including Amey Highways, Amey Rail and Fleet Services) and BPO
Services (including Amey Business Services). Amey Ventures, the specialist
PFI/PPP business, supports the other two core businesses of the Group.
* The Group also announced the sale of non-core activities and businesses.
These include the portfolio of investments in PFI special purpose companies,
which were sold to Laing Investments Limited in March 2003 and the smaller
businesses Vectra N Jones and Amey Resources Management Solutions. Amey
Vectra, as well as Amey's stake in the BCN remote monitoring technology
business are currently in the process of being sold.
Restore confidence in Amey's financial management:
* Regaining the confidence of the Group's banking syndicate has been a
major priority and the Acting Finance Director and his team have made great
strides towards this end by improving the transparency of accounting systems
and processes and the prudence of the Group's financial assumptions; Banking
facilities extending to mid 2004 were agreed with Amey's banking syndicate
in February 2003
* Cash management processes have significantly been strengthened
Effect improvements and efficiencies in the Group's operating structure:
*The Group underwent a major restructuring programme to deliver efficiency
measures, streamline management and improve the effectiveness of all
management controls. Reorganisation and redundancies have been effected in
late 2002 and early 2003, and the cost benefits these will bring (estimated
to be of the order of #15 million on an annualised basis) are anticipated to
filter through from the second half of 2003 onwards.
Reduce working capital required to support bidding activities:
* Bidding activities on large-scale opportunities have been reduced for the
immediate future to conserve cash. Major bids currently under way and where
the Board believe that the chances of success are good, are going to be seen
through to conclusion. In addition strict project selection criteria will be
used before new bids are initiated.
* A partnership arrangement to share bid costs and investments has been
entered into with Laing Investments Limited.
Conclude the LUL PPP transaction:
* An alternative structure was established in December 2002 for the
investment in the equity in the LUL PPP transaction. This structure enabled
the contract to close and Amey to recover its bid costs in 2002 while
maintaining its opportunity to take up full equity participation during
2003.
* Amey is working towards concluding the arrangements that will allow the
Group to exercise its option by the end of June 2003 and to secure fully its
position in this valuable contract.
Operational Review 2002
Amey provides services that are integral to the core operations of its
customers. In return for the quality service that the Group's businesses
maintained during a difficult period, Amey is grateful for having enjoyed the
continuing support of its customers throughout 2002.
Amey Transport
Highways: Amey now manages and maintains 25% of English and 50% of Scottish
trunk roads and motorways and we are leaders in the shift from maintenance to
management and operation.
Amey Highways bidding activities were extremely successful in 2002, and the
Group was awarded a number of new contracts including the innovative contract to
provide comprehensive highways services to Hertfordshire County Council and four
contracts for the management of parts of the Highways Agency's national road
network. In addition this business has won the Street Lighting PFI contract for
Walsall Metropolitan Borough and is well placed to win a number of other major
PFI Street Lighting contracts.
Rail: This business manages and maintains substantial parts of the
UK's railway infrastructure, currently having a 12% market share of the
maintenance market, and being a leading provider of track and signal renewals
services.The period during which Railtrack was in administration was a difficult
one, but the Group was not asked to make any changes in existing contracts. Amey
Datel as a subsidiary of Amey Rail specialises in the provision and maintenance
of 'real-time' customer information and integrated control and communication
systems to the transportation industry.
Amey Rail won a major extension for the Great Western Zone contract in 2002 and
has a strong orderbook for 2003 and future years. In March 2003, the Group was
pleased to announce the extension of the Exeter contract until April 2004.
Amey Fleet Services: Amey Fleet Services operations currently
consist of more than 2,500 road vehicles - from utility cars to bespoke heavy
trucks, and more than 12,000 items of specialist equipment and plant which are
leased to rail, highways and a variety of other sectors.
This business offers both good margins and potential for significant future
growth and its diverse fleet provides a key element of support and delivery
across a number of the Group's other operations as it works closely with Amey
Highways and Amey Rail. In addition, Amey Fleet Services sells a significant
part of its business directly to third party clients both in the public and the
private sectors.
BPO Services
Ameysis Services, now trading as Amey Business Services: In the Interim Report
and Accounts we announced that all our Business Process Outsourcing and
Information Technology activities were brought together to form Ameysis
Services. As part of the continuing streamlining of Amey's business, these
activities were merged in late 2002 with the Group's FM and estates services
businesses. In this way Amey now delivers all its clients' outsourced services
through a single business, called Amey Business Services. This business has a
number of key contracts including those with QinetiQ, Centrica, DSTL, West
Berkshire District Council, Glasgow Schools and the Ministry of Defence.
Major new contracts or extensions won in 2002 included the PFI
contract to provide services to the Electronic Libraries for Northern Ireland,
white collar outsourcing contracts with the DTI and West Berkshire and further
extensions to the well established contract with Centrica. The business has an
extensive and long order book.
Amey Ventures
Amey Ventures is a specialist business that has led the Group in the development
of projects that require cross-disciplinary teams, structured finance or a
combination of both. Its revenues are derived from project fees charged to
establish and manage consortia, joint ventures and other special purpose
companies, and from returns on equity investments in companies set up under the
Private Finance Initiative (PFI) and Public Private Partnerships (PPP).
In 2002, Amey's involvement in the long-delayed London Underground PPP and the
rising cost of bidding for a growing number of major opportunities that happened
concurrently, has meant that it faced a difficult year. Nevertheless, Amey
continued to develop successfully its valuable pipeline of opportunities,
culminating with the financial close of the LUL PPP contract in December 2002
and the achievement of preferred bidder position in three major opportunities,
one of which reached financial close in 2002, whereas the other two are expected
to be concluded in 2003.
In the second half of 2002, Amey Ventures initiated the process to sell the
Group's portfolio of PFI equity investments to Laing Investments Limited. This
transaction was completed on 14 March 2003, and the equity interests in eight
PFI project companies were sold for a total consideration of #43 million. Amey
has maintained the long-term service delivery contracts associated with these
projects. In addition, Amey Ventures, in collaboration with Laing, will continue
to pursue projects in the current pipeline and selectively, new opportunities.
Working capital requirements for this activity in certain sectors is to be
shared between Amey and Laing. This arrangement preserves Amey's strong position
in the PFI/PPP market and its ability to win new bids, but has unlocked value
from the projects Amey Ventures has won to date. The Group's interests in the
poorly performing Croydon Tramlink concession have not been included in this
arrangement with Laing, and Amey Ventures is involved in restructuring this
project in order to secure best value.
The delay to the closure of the London Underground PPP was a major contributor
to Amey's financial difficulties during the year. By identifying an alternative
structure that enabled the Group to close the contract and recover bid costs
without investing its share in the equity of the transaction, #25 million cash
inflows were generated in December of 2002. The option for Amey to fully take up
its equity position in this project remains a valuable opportunity and the Group
is fully engaged in actions that will allow this option to be exercised by the
end of June 2003 deadline.
Businesses in the course of being discontinued
The sale of the Vectra business is progressing and negotiations are ongoing with
a number of parties.
Dividends
As a result of the lack of distributable reserves the Group will not be able to
pay a dividend for the immediate future.
Board changes
On January 2 the Board announced the departure of Brian Staples as Group Chief
Executive. At that time the appointment was also announced of Mel Ewell as Chief
Operating Officer and on 26 February, the Board appointed him to the position of
Chief Executive Officer.
David Miller, the Group Finance Director, resigned and left the Group on 10
September 2002 and was replaced by Michael Kayser who resigned on 15 October
2002. He was replaced by Eric Tracey as Acting Group Finance Director. Eric
Tracey is a senior partner at Deloitte & Touche. Mr Tracey attends all Board and
Executive Meetings but is not a Board Member. He will remain with us until June
2003 and his experience has been invaluable in rebuilding confidence in the
Group's finances.
Robert Osborne and John Robinson also both left the board during the year as a
result of the strategic review of the business, which merged the Business
Development Unit with Amey Ventures and disbanded Amey Technology Services.
David Gemmill retired as a Non-Executive Director on 16 May 2002.
Orderbook
The Group has a secured workload (including extensions anticipated in its
current contracts) with projected revenues in excess of #700 million for 2003,
similar levels for 2004 and some #2 billion for 2005 and beyond. In addition,
turnover in excess of #6 billion is expected to flow to Amey through fees, other
income and consolidation of the Group's share of the Tube Lines business, should
the option for Amey to take up its position in the LUL PPP transaction be
exercised.
Further to a strong order book, Amey's current pipeline of opportunities is
extensive and the Group operates in sectors where business activity is expected
to remain strong.
Outlook
Amey has started 2003 with a much changed and more focused organisation. The
Group has a strong order book and a good track record with its customers and has
now successfully completed the negotiations with its lenders.
A new management team is in place and the Board intends to drive forward the
Group's core businesses that are all facing strong markets with good long-term
prospects.
In November 2002 the Board announced that it had decided to review the options
of rebuilding the value of the Group and that it had appointed Hawkpoint
Partners Ltd, alongside the Company's existing financial advisers, Deutsche
Bank, to assist in this process. The Board announced in January 2003, that in
the light of press speculation at the time regarding a possible offer being made
for the Company, very preliminary interest had been expressed in it. Whilst the
Board has outlined its strategy to take Amey forward, the Board has already
stated its intention to explore further this preliminary indication of interest.
The early part of the year has produced results in line with the Board's
expectations. Core continuing operations during 2003 are performing
satisfactorily and are expected to reach broadly similar levels of activity to
2002. In addition Amey is fully engaged in actions to allow its equity position
in the London Underground PPP project to be fully taken up, which when achieved,
will add substantial further benefits to the Group.
Group profit and loss account
-------------------------- ----- --------- --------- ------- ------
Pre-exceptional Exceptional Total
items items (note 3)
2002 2002 2002 2001
For the year ended 31 Note #000 #000 #000 #000
December 2002
-------------------------- ----- --------- --------- ------- ------
Turnover
Continuing operations and 858,870 - 858,870 763,053
share of joint ventures'
turnover
Discontinued operations including 58,294 - 58,294 68,356
share of joint ventures'
turnover
----------------------------- --------- --------- ------- ------
Group and share of joint 2 917,164 - 917,164 831,409
ventures' turnover
Less: share of joint ( 49,645) - ( 49,645) ( 44,940)
ventures' turnover
-------------------------- ----- --------- --------- ------- ------
Group turnover 867,519 - 867,519 786,469
-------------------------- ----- --------- --------- ------- ------
Operating profit (loss)
Loss before share of ( 1,758) ( 113,671) ( 115,429) ( 20,764)
operating profit of joint
ventures
Share of operating profit 11,374 - 11,374 18,249
of joint ventures
-------------------------- ----- --------- --------- ------- ------
Operating profit (loss) 9,616 ( 113,671) ( 104,055) ( 2,515)
of which attributable to:
-------------------------- ----- --------- --------- ------- ------
Core continuing 8,378 ( 23,386) ( 15,008) ( 11,010)
activities
Activities being ( 11,600) ( 89,390) ( 100,990) ( 13,999)
discontinued
-------------------------- ----- --------- --------- ------- ------
Continuing operations ( 3,222) ( 112,776) ( 115,998) ( 25,009)
Discontinued operations 12,838 ( 895) 11,943 22,494
-------------------------- ----- --------- --------- ------- ------
Operating profit (loss) 9,616 ( 113,671) ( 104,055) ( 2,515)
Loss on disposal of 3 - ( 7,865) ( 7,865) -
subsidiary undertakings
-------------------------- ----- --------- --------- ------- ------
Profit (loss) before 9,616 ( 121,536) ( 111,920) ( 2,515)
interest
of which attributable to:
-------------------------- ----- --------- --------- ------- ------
Core continuing 8,378 ( 23,386) ( 15,008) ( 11,010)
activities
Activities being ( 11,600) ( 89,390) ( 100,990) ( 13,999)
discontinued
-------------------------- ----- --------- --------- ------- ------
Continuing operations ( 3,222) ( 112,776) ( 115,998) ( 25,009)
Discontinued operations 12,838 ( 8,760) 4,078 22,494
-------------------------- ----- --------- --------- ------- ------
Profit (loss) before 9,616 ( 121,536) ( 111,920) ( 2,515)
interest
-------------------------- ----- --------- --------- ------- ------
Net interest payable
Group ( 9,965) - ( 9,965) ( 8,212)
Share of interest payable ( 10,038) - ( 10,038) ( 10,891)
by joint ventures
-------------------------- ----- --------- --------- ------- ------
( 20,003) - ( 20,003) ( 19,103)
Other finance income 2,382 - 2,382 3,363
-------------------------- ----- --------- --------- ------- ------
Net interest payable ( 17,621) - ( 17,621) ( 15,740)
------------------------- ----- --------- --------- ------- ------
Loss on ordinary activities ( 8,005) ( 121,536) ( 129,541) ( 18,255)
before taxation
of which attributable to:
-------------------------- ----- --------- --------- ------- ------
Core continuing 2,072 ( 23,386) ( 21,314) ( 13,280)
activities
Activities being ( 11,600) ( 89,390) ( 100,990) ( 15,502)
discontinued
-------------------------- ----- --------- --------- ------- ------
Continuing operations ( 9,528) ( 112,776) ( 122,304) ( 28,782)
Discontinued operations 1,523 ( 8,760) ( 7,237) 10,527
-------------------------- ----- --------- --------- ------- ------
Loss on ordinary activities ( 8,005) ( 121,536) ( 129,541) ( 18,255)
before taxation
Taxation 4 ( 328) 11,338 11,010 3,866
-------------------------- ----- --------- --------- ------- ------
Loss on ordinary activities ( 8,333) ( 110,198) ( 118,531) ( 14,389)
after taxation
-------------------------- ----- --------- --------- ------- ------
Equity minority interests 109 ( 678)
-------------------------- ----- --------- ---------
Loss for the financial ( 118,422) ( 15,067)
year
Dividends 5 ( 35) ( 8,368)
-------------------------- ----- --------- --------- ------- ------
Loss retained ( 118,457) ( 23,435)
-------------------------- ----- --------- --------- ------- ------
Loss per Ordinary share
Basic and diluted (47.5p) (6.1p)
There were no exceptional items in 2001.
Group balance sheet
----------------------------- ------ ---------- ----------
2002 2001
At 31 December 2002 Note #000 #000
----------------------------- ------ ---------- ----------
Fixed assets
----------------------------- ------ ---------- ----------
Intangible assets -goodwill 162,591 179,778
----------------------------- ------ ---------- ----------
Tangible assets 60,875 58,056
----------------------------- ------ ---------- ----------
Investments 603 662
----------------------------- ------ ---------- ----------
Investments in subsidiary undertakings - -
----------------------------- ------ ---------- ----------
Investments in joint ventures:
Share of gross assets 258,276 222,972
Share of gross liabilities ( 231,826) ( 193,999)
----------------------------- ------ ---------- ----------
26,450 28,973
Loans with joint ventures 7,449 10,502
Goodwill arising on acquisition of joint venture 2,338 11,395
less amortisation
---------------------------------- ------ ---------- ----------
36,237 50,870
----------------------------- ------ ---------- ----------
260,306 289,366
----------------------------- ------ ---------- ----------
Current assets
Stocks 6,454 4,297
Debtors:
Amounts falling due within one year 219,920 239,208
Amounts falling due after more than one 15,000 46,559
year
Cash at bank and in hand 76,729 35,013
----------------------------- ------ ---------- ----------
318,103 325,077
Creditors - amounts falling due within one ( 350,321) ( 316,682)
year
----------------------------- ------ ---------- ----------
Net current (liabilities) assets ( 32,218) 8,395
----------------------------- ------ ---------- ----------
Total assets less net
current (liabilities) assets 228,088 297,761
Creditors - amounts falling due after more ( 209,247) ( 159,780)
than one year
Provision for liabilities and charges ( 670) ( 7,083)
----------------------------- ------ ---------- ----------
Net assets excluding pension liability 18,171 130,898
----------------------------- ------ ---------- ----------
Pension schemes:
With a net surplus - 9,940
With a net deficit ( 48,511) ( 11,270)
----------------------------- ------ ---------- ----------
( 48,511) ( 1,330)
----------------------------- ------ ---------- ----------
Net (liabilities) assets including pension ( 30,340) 129,568
liability ------ ---------- ----------
-----------------------------
Capital and reserves
Called up share capital 2,527 2,510
Share premium account 147,565 144,199
Other reserves 1,594 3,700
Profit and loss account ( 182,130) ( 21,154)
----------------------------- ------ ---------- ----------
Equity shareholders' funds 6 ( 30,444) 129,255
Equity minority interests 104 313
----------------------------- ------ ---------- ----------
Capital employed ( 30,340) 129,568
----------------------------- ------ ---------- ----------
Group cash flow statement
----------------------------------- ------ ----------- ----------
2002 2001
For the year ended 31 December 2002 Note #000 #000
----------------------------------- ------ ----------- ----------
Net cash flow from operating activities 7 ( 7,199) 26,725
----------------------------------- ------ ----------- ----------
Dividends from joint ventures - -
----------------------------------- ------ ----------- ----------
Returns on investments and servicing of
finance
Interest received 1,830 725
Interest paid ( 11,181) ( 8,159)
Finance lease interest paid ( 614) ( 778)
----------------------------------- ------ ----------- ----------
( 9,965) ( 8,212)
----------------------------------- ------ ----------- ----------
Taxation
UK Corporation tax paid ( 16) ( 2,970)
----------------------------------- ------ ----------- ----------
Capital expenditure
Purchase of tangible fixed assets ( 26,593) ( 35,994)
Sale of tangible fixed assets 15,131 17,434
----------------------------------- ------ ----------- ----------
( 11,462) ( 18,560)
----------------------------------- ------ ----------- ----------
Acquisitions and disposals
Purchase of interests in and loans to joint ( 12,172) ( 16,140)
ventures
Loans from joint ventures 1,165 -
Purchase of subsidiary undertakings - ( 793)
Disposal of subsidiary undertakings 452 -
Net cash balance disposed of with subsidiary ( 397) -
undertaking
Net overdrafts acquired with subsidiary - ( 351)
undertakings
----------------------------------- ------ ----------- ----------
( 10,952) ( 17,284)
----------------------------------- ------ ----------- ----------
Equity dividends paid ( 5,632) ( 7,994)
----------------------------------- ------ ----------- ----------
Cash outflow before use of liquid resources and ( 45,226) ( 28,295)
financing
Management of liquid resources - -
----------------------------------- ------ ----------- ----------
Financing
Issue of shares net of expenses 1,271 184
Long-term loan finance 90,615 28,175
Repayment of long-term finance ( 982) ( 1,364)
Capital element of finance leases ( 3,962) ( 4,008)
----------------------------------- ------ ----------- ----------
86,942 22,987
----------------------------------- ------ ----------- ----------
Increase (decrease) in cash 8 41,716 ( 5,308)
----------------------------------- ------ ----------- ----------
Statement of total recognised gains and losses
----------------------------------- ------ ----------- ----------
2002 2001
For the year ended 31 December 2002 #000 #000
----------------------------------- ------ ----------- ----------
Loss for the financial year excluding share ( 130,877) ( 25,613)
of joint ventures
Share of profit for the financial year of 1,336 7,358
joint ventures
Taxation 4 11,010 3,866
Minority interest in profit after tax 109 ( 678)
----------------------------------- ------ ----------- ----------
( 118,422) ( 15,067)
Actuarial loss recognised in the pension ( 60,742) ( 30,376)
schemes
Deferred tax thereon 18,223 9,112
Pension asset acquired on TUPE transfer of - 3,600
employees
Deferred tax thereon - ( 1,080)
----------------------------------- ------ ----------- ----------
Total gains and losses recognised since last ( 160,941) ( 33,811)
financial statements
---------------------------------------- ------ ----------- ----------
Notes
1 Principal accounting policies
The accounting policies adopted are as described in the 2001 Annual Report
except for the modification of the treatment of PFI pre-contract bid costs to
bring it in line with UITF 34, which has the effect of increasing profit for the
year and net assets at the year end by #4.0 million. The impact on the prior
year is immaterial.
2 Segmental analysis
Turnover Adjusted
profit
2002 2001 2002 2001
#000 #000 #000 #000
------------------------ ------ -------- -------- --------
Transport Services 465,712 322,499 46,052 16,137
BPO Services 306,167 292,363 6,538 8,575
Central ( 1,101) ( 1,504) ( 25,718) ( 18,680)
------------------------ ------ -------- -------- --------
Core continuing 770,778 613,358 26,872 6,032
activities
Activities being 88,092 149,695 ( 10,891) ( 13,999)
discontinued
Discontinued operations 58,294 68,356 13,159 22,494
(including share of joint
ventures)
- - - -
------------------------ ------ -------- -------- --------
Group and share of joint 917,164 831,409 29,140 14,527
ventures
Goodwill amortisation - - ( 10,483) ( 11,095)
Non-cash pension - - ( 9,041) ( 5,947)
adjustment
EBIT 9,616 ( 2,515)
Group interest and
share of interest
payable by
joint ventures ( 20,003) ( 19,103)
Other finance income 2,382 3,363
------------------------ ------ -------- -------- --------
( 8,005) ( 18,255)
------------------------ ------ -------- -------- --------
Adjusted profit excludes items which are disclosed in note 3. The adjusted
profit on ordinary activities all arises from trade in the UK.
3 Exceptional items
Core continuing
activities
------- ------- ------- -------
Transport BPO Central Total Activities Discontinued Total
Services Services being operations exceptional
discontinued items
#000 #000 #000 #000 #000 #000 #000
-------------------- ------- ------- ------- ------- ------- ------- -------
Current asset write 750 1,183 3,000 4,933 69,949 - 74,882
downs
Dispute settlements 3,000 3,705 - 6,705 6,705
Investment write - - - - 19,441 - 19,441
downs
Advisers' fees - - 8,000 8,000 - - 8,000
relating to banking
covenant
renegotiations
Strategic review and - - 3,748 3,748 - 895 4,643
restructuring costs
-------------------- ------- ------- ------- ------- ------- ------- -------
3,750 4,888 14,748 23,386 89,390 895 113,671
Loss on sale of - - 7,865 7,865
subsidiary
undertakings
-------------------- ------- ------- ------- ------- ------- ------- -------
23,386 89,390 8,760 121,536
Tax on exceptional ( 11,338)
items
-------------------- ------- ------- ------- ------- ------- ------- -------
110,198
-------------------- ------- ------- ------- ------- ------- ------- -------
4 Taxation on loss on ordinary activities
2002 2001
#000 #000
---------------------------------- --------- --------
Analysis of credit in the year
UK Corporation tax at 30 % (2001: 30%)
- on non-recurring items included in operating loss - -
- on other operating loss 106 103
Adjustment in respect of prior years 165 (154)
Current year losses carried back to prior years (378) (3,422)
Share of joint ventures current tax 40 -
Transfer to pension liability (1,997) (776)
---------------------------------- --------- --------
( 2,064) ( 4,249)
Overseas Corporation tax 3 5
---------------------------------- --------- --------
Total current tax ( 2,061) ( 4,244)
Transfer of deferred tax asset ( 2,794) ( 2,949)
Transfer to deferred tax provision ( 6,155) 3,327
---------------------------------- --------- --------
( 11,010) ( 3,866)
---------------------------------- --------- --------
5 Dividends
----------------------- --------- --------- --------- ---------
2002 2001 2002 2001
Pence per share Pence per share #000 #000
----------------------- --------- --------- --------- ---------
Interim paid - 1.11p - 2,771
Final proposed - 2.23p - 5,597
Adjustment in respect of - - 35 -
prior year dividend paid
----------------------- --------- --------- --------- ---------
- 3.34p 35 8,368
----------------------- --------- --------- --------- ---------
6 Reconciliation of movements in shareholders' funds
-------------------------------------------- ------ ------- ------ ----------
Share capital Share premium Other reserves Profit and loss 2002 2001
account
#000 #000 #000 #000 #000
------------------------ --------- ------ ------ ------- ------ ----------
At 1 January 2002 2,510 144,199 3,700 ( 21,154) 129,255 159,003
Loss on ordinary - - - ( 118,422) ( 118,422) ( 15,067)
activities after taxation
after minority
interests
Dividends - - - ( 35) ( 35) ( 8,368)
Actuarial loss recognised - - - ( 60,742) ( 60,742) ( 30,376)
in the pension schemes
Deferred tax thereon - - - 18,223 18,223 9,112
Pension asset acquired on - - - - - 3,600
TUPE transfer of
employees
Deferred tax thereon - - - - - ( 1,080)
Contributions to QUEST - - - ( 1,385) ( 1,385) ( 5,210)
Transfer of QUEST - ( 1,385) - 1,385 - -
contributions to share
premium account
Release of contingent - - - - ( 300)
shares
Actual and contingent 17 4,751 ( 2,106) - 2,662 17,941
issue of shares
----------------------- --------- ------ ------ ------- ------ ----------
At 31 December 2002 2,527 147,565 1,594 ( 182,130) ( 30,444) 129,255
----------------------- --------- ------ ------ ------- ------ ----------
Cumulative goodwill eliminated against the Profit and loss and Other reserves
prior to 31 December 1998 amounted to #15,305,000 at 31 December 2002 (2001:
#15,305,000)
Group Other reserves relate to Ordinary shares to be issued as deferred
consideration on the purchase of an interest in MNN Holdings Limited.
7 Net cash flow from operating activities
------------------------------------------
2002 2001
Group #000 #000
----------------------- -------- ----------
Operating loss ( 115,429) (20,764)
Depreciation 9,242 7,894
Amortisation of goodwill 10,483 11,095
Difference between pension charge and cash 9,041 5,947
contributions
Profit on sale of tangible fixed assets ( 821) (328)
Write-down of investments in Joint Ventures 26,270 -
Other non cash items 2,178 868
Decrease in stocks ( 2,212) (1,913)
Increase (decrease) in debtors 52,260 (25,826)
Increase in creditors 1,789 49,752
----------------------- -------- ----------
(7,199) 26,725
----------------------- -------- ----------
8 Reconciliation of net cash flow to movement in net debt
----------------------------------------------------------
2002 2001
Group #000 #000
-------------------------- ----------- --------------
Increase (decrease) in cash for year 41,716 (5,308)
Cash inflow from financing ( 89,634) (26,811)
Cash outflow from finance leases 3,962 4,008
Cash flow from management of liquid resources - -
-------------------------- ----------- --------------
Change in net liquid funds resulting from cash (43,956) (28,111)
flows
Loans transferred on acquisition of subsidiary - (132)
undertaking
Inception of finance leases ( 406) (6,004)
-------------------------- ----------- --------------
Movement in net debt in the year (44,362) (34,247)
Net debt at 1 January (106,383) (72,136)
-------------------------- ----------- --------------
Net debt at 31 December (150,745) (106,383)
-------------------------- ----------- --------------
9 Analysis of changes in net funds
-----------------------------------
-------------- ------- -------- ------ ------- --------
At 1 January Non cash At 31 December
2002 Disposals movement Cash flow 2002
Group #000 #000 #000 #000 #000
-------------- ------- -------- ------ ------- --------
Cash at bank 35,013 ( 397) - 42,113 76,729
and in hand
Debt due ( 2) - - ( 14,998) ( 15,000)
within one
year
Debt due after ( 128,993) - - ( 74,635) ( 203,628)
more than one
year
Finance ( 12,401) - ( 406) 3,961 ( 8,846)
leases
----------- ------- -------- ------ ------- --------
( 106,383) ( 397) ( 406) ( 43,559) ( 150,745)
---------- ------- -------- ------ ------- --------
10. Financial Information contained herein
This document contains certain statements that are or may be forward-looking
with respect to operating and financial performance and plans and objectives of
the Group and its joint ventures. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of factors that
could cause actual results and developments to differ materially from those
expressed or implied by such forward-looking statements and forecasts. These
factors include, but are not limited to, statements made elsewhere in this
document as well as (i) exposure to fluctuations in interest rates and rates of
taxation (ii) changes in UK government procurement policy (iii) the impact of
competition (iv) changes in customer's service requirements and (v) adverse
economic conditions.
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The statutory accounts for the year ended 31 December 2001 have been
delivered to the Registrar of Companies and have received an audit report under
section 235 which was unqualified and did not contain statements under section
237 (2) or (3) of the Companies Act 1985. The balance sheet at 31 December 2002
and the Group profit and loss account, Group cash flow statement, statement of
total recognised gains and losses and associated notes for the year then ended
have been extracted from the Group's financial statements. Those financial
statements have not yet been delivered to the Registrar, nor have the auditors
reported on them.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UNRVROAROURR