|
Article Excerpt
SAMIR BRIKHO, CHIEF EXECUTIVE, AMEC PLC: Well, good morning ladies and gentlemen. It's nice to be here and it's a good day for us. Let me first go through the health and safety. There are no fire drills planned for this morning. So if you hear any alarm follow please the fire exit signs to the nearest emergency exit and proceed to the assembly point which is in Finsbury Circus. So you can go home or whatever you can do like after that.
Now we have some small technical problem with the webcast, so we are trying to get that under control. They are working on it and they will give me a sign when we can start. Do you have any questions?
So we will be starting any second from now I hope.
Maybe I will use the time actually to introduce Ian McHoul. Ian McHoul has joined us in September this year or last year 2008. For those who have already met Ian, it's great. But this is the first, his first set of results for AMEC this year and I think he is, actually he is not starting with a bad start. I think he is starting with quite a good set of results.
So that's the minimum now. This is now the floor and from here we're going up. Would you say a couple of words about who you are, where you have been coming from?
IAN MCHOUL, CFO, AMEC PLC: Yes, good morning everybody. I've spent most of my working life working in the brewing industry, in the pub industry here in the UK and in Australia. So the engineering business is something quite different for me. I regularly see on slides various initials standing for gas de-sulfurization or whatever it happens to be and I ask what the initials mean and I'm then -- it's then explained to me and I wish I hadn't have asked. But I am getting to know the business and getting to know the people and enjoying it very much.
SAMIR BRIKHO: Thank you, Ian. So we are getting a sign that we can actually go on. So good morning, ladies and gentlemen. I will be giving you -- spending some moments on the highlights of the results today before I give the space for Ian to go through the finance and then I will be finalizing towards the end. And after the session as normal we'll be having the Q&As.
This is my third time I'm presenting the yearly results for AMEC and I'm so pleased today to be here because this is another set of record for AMEC. I think the numbers, they talk for themselves. Whatever the KPI you take a look on we have been beating that.
It has been a great journey for us. And given the dreadful state of the financial markets at the present time, I am particularly pleased when I take a look on the order book and I see the order book was GBP3b for the year, it's a great number. If you think about the Natural Resources, we have been going up with 41% for the year. And also the Power and Process and E&E has been making great jobs in order to underpin the significant record which we have in the order book and the significance in all the wins which we have been having during the year.
And if you take a look on the Power and Process and E&E and you see also their contribution to the margins, there has been an enormous change. We shifted now from 2007 from 5.1% to 2008 of 7.1%. So a shift of 200 basis points in one year.
It has been a year of significant progress for AMEC. And it is our confidence in AMEC and AMEC's future therefore we have the dividend -- increased the dividend with 15% which is reflecting the state of confidence which we have and it's progressive.
The balance sheet which we have has never been so strong. Our cash position today gives us competitive advantage. They used to say that cash is king. Now we say cash is strategic or even cash is emperor. This will give us a lot of ability to be doing some selective acquisitions and I will discuss about that a little bit later on.
If you take a look on how the market consensus has been built up and if you take a look on -- and when we started the year and in March 2008, the market consensus for the 2008 pre-tax profit was GBP168m and the preliminary results of March 2009 of GBP200m, this is exceeding the market consensus with some 25%.
And I think this is a great story. We continue to beat the numbers which we have been setting for ourselves and that has to do with our employees. Our employees are acting as one AMEC. We have a lot of competence in AMEC in the past and that was one of the attractions which attracted me to come to AMEC.
As you remember when I said in 2006, when we made the SWOT analysis, one of the good things with AMEC is their people. While it is important to have the qualification and skills as individuals, it is even more important when you have them as a team. You need to have an experienced team and you need to have a mature team and that's what we are creating.
And by doing so we have been able through our own initiative to deliver on the STEP Change program which we have initiated in 2006. We delivered the program four months ahead of schedule and we continue on track to deliver on our Operational Excellence program which is going to underpin and ensure us that we are going to deliver the target of 8.5% which we have set out for the 2010.
But I don't stop here actually. Financial records are great, but it has been a great year for AMEC too in terms of health and safety. We have a record number, on the lowest number of incidents which we have in our teams. And that's something we should be very proud of because this is going to give us an additional differentiation in the competitive market which we are working in.
So a great set of results. We are very pleased with them. We are very upbeat. And I would like to give the chance to Ian that he can walk through the financials and then we continue with the discussions. Thank you.
IAN MCHOUL: Thank you Samir and a very good morning again, everybody. It's good to be here today. Having been on board with AMEC some six months now and as I said, got to know the team and to understand the position and key drivers of this business, it's clear to me that this is a great time to have joined the Company despite the economic times that we're all living in.
And here you can see what I mean, the very positive development across all the key indicators that Samir has already highlighted. At GBP2.6b revenue is up 11% reflecting strong progress in Natural Resources and Earth Environmental. EBITA is up over 70% with major advances across all the divisions on the back of market strength, sector mix management and the benefits of our STEP Change program.
Margin is 7.1% ahead of target and up 200 basis points from last year. Profit before tax at GBP210m is up 66% and diluted earnings per share are up 55%. And I'm delighted to announce that the Board are recommending a final dividend of 10.1p per share, bringing the total dividend for the year to 15.4p, an increase of 15%. At this level the dividend cover is 2.8 times. And as you can see the cash position and the order book are also in very good shape.
Our job today is to show you how these numbers have come about, increasing clarity, increasing visibility and increasing therefore your understanding of the business. We will show you the impact of the bolt-on acquisitions we've made as part of our normal day-to-day running of the business. We will show you the impact of the stronger North American currencies. We will show you the organic growth in revenues and in margins. And we will give you greater visibility on our order book so you can better assess our performance going forward.
So turning first to Natural Resources, the numbers look like this. You can see strong progression in both revenue and EBITA and a 130 basis points increase in margin to an industry leading 10.7%. CapEx represents 55% of revenue up from 50% in '07 and margins for both CapEx and OpEx are significantly ahead at 13% and 8% respectively. Average employee numbers are 10% and the order book is ahead over 40% reflecting a very strong final quarter. Importantly there are significant gains in both CapEx and OpEx contracts and the quality of the order book continues to improve.
This next slide analyzes the revenue growth and the EBIT development over the year. On the revenue the year-on-year growth is 19% and you can see from the chart on the left that 3% came from bolt-on acquisitions and 5% from the strengthening of the North American currencies against sterling. This is a straight translation variance with the average rates for the US dollar and the Canadian dollar both having strengthened some 8% compared with 2007. The underlying organic growth is then 11% reflecting a good performance across the business but in particular in North America.
The chart on the right shows the EBITA development from GBP95m in '07 to GBP129m in '08, a 35% increase. Acquisitions have added GBP5m and currency translation has added GBP6m. The underlying revenue growth has contributed GBP10m and then the margin expansion has delivered GBP13m as we've driven improved business mix and as the benefits of STEP Change come through. All in all, a very positive out-turn.
Moving on now to Power and Process, the revenue and EBITA trends are quite different. Over the last couple of years we have very much focused on margin rather than volume, with tighter criteria for new work taken on and the run-off of lower margin work bid three or four years ago, and you can see the consequence.
EBITA growth of 50% despite pretty flat revenue and a jump in margin to 5.8%. Similarly the gross margin on the order book has increased through 2008 and whilst the backlog showed a significant decline for much of the year, it subsequently improved to be standing at GBP1.28m at the year end down just 6%. In addition of course we have the benefits of the Sellafield contract to come. Whilst this should deliver around GBP10m of EBITA per annum in a mature year, which will be in two or three years time, it has a minimal impact on the order book as it is serviced through a joint venture arrangement and therefore doesn't impact revenue.
Here you can see the story told in the same way as I did for Natural Resources. And you can see very clearly from the chart on the right the success of our disciplined approach and of our strategic focus on quality and on margin, which has doubled in two years to 5.8%. And we look forward to further margin expansion as we move ahead.
On now to Earth and Environmental and you can see a very positive picture, with revenue up nearly 40%, EBITA up nearly 60% and margin ahead 100 basis points at 8.4%. I think the story is best told looking at the charts.
During the year Earth and Environmental strengthened its competitive position through a number of acquisitions including that of Geomatrix Consultants, California based specialists in environmental remediation of seismic groundwater services. Overall, acquisitions added 12% to the revenue line and currency added a further 8%, the business being very much North American focused. Organic growth was then a very healthy 19%.
On EBITA you can see the impacts of acquisitions, currency translation and the revenue growth. And you can also see the margin expansion reflecting both improved business mix and internal performance improvement initiatives. We think the business is well placed for further expansion.
And lastly and for completeness, Investment Activities look like this -- much wound down now as we continue to dispose of non-core businesses. The plant hire operations and of course the majority of the UK Wind Development business were both sold in the year, the latter to Vattenfall for a cash consideration of GBP126m. The only meaningful activity remaining is the ongoing bridge project in South Korea, which we expect to be profitable going forward albeit at fairly modest levels.
Let me now move away from the divisional results and look first at exceptional items. In aggregate we have a pre-tax exceptional gain of GBP97m which arises principally from the sale of the Wind business where we made a profit of GBP105m. On other disposals we made a net profit of GBP4m but we registered GBP11m loss on discontinued operations, mainly in relation to exchange movements on indemnity provisions and asset write-downs. After a tax charge of GBP37m, principally a provision against the Wind disposal, there is a net exceptional gain of GBP60m.
We continue to manage exposures relating to the construction businesses we sold in 2007 and progress on these has been good. And of the major contingent liabilities we flagged in our 2007 accounts only one remains. And this relates to the clean up work we undertook at the World Trade Center where we believe we are fully covered by insurance.
On now to taxation and you can see here the key information for the last two years. Our underlying tax rate, that...
|
