RNS Number : 7747X
AMEC PLC
21 February 2012
 



 

 

 

AMEC plc 2011 results

Strong performance continues

 

Highlights

Strong operating performance

▪    Revenue £3,261 million, up 11 per cent on 2010

▪    EBITA1 £299 million, up 12 per cent

▪    EBITA margin2 9.2 per cent (2010: 9.1 per cent)

▪    Diluted EPS from continuing operations4 70.5 pence, up 13 per cent

▪    Operating cash flow5 £267 million, up 22 per cent

Good order intake and forward visibility

▪    Order book £3.7 billion (31 December 2010: £3.1 billion)

Invested £263 million in acquisitions in 2011; pipeline remains strong

Dividend per share up 15 per cent, to 30.5 pence

Commencing share buyback programme of £400 million

Expect to deliver EPS target of greater than 100 pence ahead of 2015

 

 

Chief Executive Samir Brikho said:

 

"AMEC continued to make good progress in 2011 boosted by oil and gas and mining in particular.  The business demonstrated strong cash generation and a record order book.

"Acquisitions strengthened our service offering and broadened our exposure to high-growth markets. The pipeline of further acquisition opportunities remains strong.

"Today we are announcing a 15 per cent increase in the dividend for the full year and, given the strength of the group's balance sheet, are commencing a £400 million share buyback programme, which is expected to be completed over the next 12 months.

"The outlook for 2012 is underpinned by the positive industry backdrop and the strength of the order book. We are now targeting an EPS of greater than 100 pence before 2015."

 

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

Interviews: with Samir Brikho, Chief Executive, Ian McHoul, Chief Financial Officer and Neil Bruce, Chief Operating Officer are available at http://www.amec.com/resultsvideo 

 

Next event: Interim Management Statement on 16 April 2012 and Annual General Meeting on 19 April 2012. An analyst and investor seminar focused on the minerals and metals market is planned for 25 April 2012.

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

Enquiries to:

AMEC plc:                                                                                                              + 44 (0)20 7539 5800

Samir Brikho, Chief Executive

Ian McHoul, Chief Financial Officer        

Sue Scholes, Director of Communications             

Nicola-Jane Brooks, Head of Investor Relations    

Media: Brunswick Group LLP - Mike Harrison and Craig Breheny         + 44 (0)20 7404 5959

  

PAGE 1

  

Financial highlights

 

Continuing operations:


2011

2010

Change (%)

Revenue

(£m)

3,261            

2,951

+11

EBITA1

(£m)

299

269

+12

Adjusted profit before tax3

(£m)

311

280

+11

Profit before tax

(£m)

259

259

-

Operating cash flow5

(£m)

267

219

+22

Adjusted diluted earnings per share4

pence

70.5

62.5

+13

Diluted earnings per share from continuing operations

pence

61.9

71.3

(13)

Dividends per share

pence

30.5

26.5

+15

 

Notes:

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

2.     EBITA as defined above as a percentage of revenue

3.     EBITA, as defined above, plus net financing income (including joint ventures) of £12 million (2010: £11 million)

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

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

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.

During 2011, the basis of presentation has been revised to present the results to the nearest million rather than to 1 decimal place and percentage movements to the nearest percent. Calculated numbers, such as EPS and margin rates, continue to be based on the underlying numbers to 1 decimal place precision.

Segmental analysis

Segmental analysis is provided for the group's core activities in the Natural Resources, Power & Process and Environment & Infrastructure (previously Earth & Environmental) divisions, as well as fornon-core Investments and other activities.

Amounts and percentage movements relating to continuing segmental earnings before net financing income, tax and intangible amortisation (EBITA) are stated before corporate costs of £34 million (2010: £36 million) and pre-tax exceptional costs of £6 million (2010: income of  £11 million). The segmental analysis for the year ended 31 December 2010 has been restated for certain changes to the reporting allocation as explained on page 12. The average numbers of employees stated in this review include agency staff and 2010 figures have been restated in line with the changes to reporting allocations.

Discontinued operations

In accordance with IFRS 5*, the post-tax results of discontinued operations are disclosed separately in the consolidated income statement. The cash flows of discontinued businesses are fully consolidated within AMEC up to the date of sale.

 

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

Any forward looking statements made in this document represent management's best judgement as to what may occur in the future. However, the group's actual results for the current and future fiscal periods and corporate developments will depend on a number of economic, competitive and other factors, some of which will be outside the control of the group. Such factors could cause the group's actual results for future periods to differ materially from those expressed in any forward looking statements made in this document.

  

 

PAGE 2

  

 

2011 results overview

 

Continuing operations


2011

Underlying business

Currency exchange

Net acquisitions

2010

Revenue

(£m)

3,261

99

(4)

215

2,951

     Y-on-Y change

(%)

+11

+3

nil

+8


EBITA

(£m)

299

16

(1)

15

269

     Y-on-Y change

(%)

+12

+6

nil

+6


EBITA margin

(%)

9.2




9.1

     Y-on-Y change

(bps)

+10





Operating cash flow

(£m)

267




219

     Y-on-Y change

(%)

+22





Order book

(£bn)

3.7




3.1

     Y-on-Y change

(%)

+18





Average number of employees


25,757




21,973

     Y-on-Y change

(%)

+17





 

 

Revenue for the year increased 11 per cent to £3,261 million (2010: £2,951 million). Underlying revenue increased by 3 per cent, driven by a strong performance within the oil and gas and minerals and metals markets, offset by a decline in oil sands and US federal activities.

EBITA increased 12 per cent to £299 million (2010: £269 million) with margins broadly in line at 9.2 per cent (2010: 9.1 per cent).  The underlying EBITA increased by 6 per cent.

Adjusted profit before tax of £311 million was ahead of the previous year (2010: £280 million) driven by volume growth and acquisitions.  There was joint venture tax of £7 million (2010: £7 million), amortisation of £39 million (2010: £25 million) and exceptional losses of £6 million (2010: profits of £11 million) resulting in profit before tax of £259 million (2010: £259 million).  The tax charge for the year, including tax on amortisation and exceptional items, was £52 million (2010: £23 million) resulting in a total profit for the year from continuing operations of £207 million (2010: £236 million).

Adjusted diluted earnings per share from continuing operations were 70.5 pence (2010: 62.5 pence), an increase of 13 per cent.

Operating cash flowfor the period was £267 million (2010: £219 million), up £48 million from last year, reflecting EBITA growth and the continued focus on cash management. Cash conversion was 89 per cent (2010: 81 per cent).

 

Dividend

The board is recommending a final dividend of 20.3 pence per share, which together with the interim dividend of 10.2 pence results in a total dividend of 30.5 pence per share (2010: 26.5 pence), an increase of 15 per cent.

PAGE 3

The board expects to maintain a progressive policy with dividend cover in the range of 2.0 to 2.5 times. The final dividend will be payable on 2 July 2012 to shareholders on the register at the close of business on 1 June 2012.

Share buyback programme

Given the strength of the balance sheet, the board has decided to commence a share buyback programme of £400 million, which is expected to be completed over the next 12 months.

Acquisitions

The group invested £263 million in acquisitions in 2011 and integration is progressing well.  The largest was MACTEC, a 2,600-person environmental consultancy focused on engineering services, water and mining and headquartered in Atlanta. This was acquired in June 2011 for £183 million. Other significant acquisitions were:

·     qedi: a 350-person project delivery company focused on completion and commissioning services for major projects in the oil and gas industry, headquartered in Aberdeen (Feb 2011)

·     Zektingroup: a 200-person specialist engineering consultancy for the oil and gas and resources industries, headquartered in Melbourne (Feb 2011)

·     BCI: a 200-person Florida based consulting firm focused on water and mining sectors (Feb 2011).

The acquisition pipeline in 2012 continues to be strong.

Average number of employees

The average number of employees was up 17 per cent in 2011, to 25,757. This reflects increased activity levels, particularly in UK North Sea and the Americas, as well as the impact of acquisitions. The largest increase was seen in the Environment & Infrastructure division, which was up 39 per cent to 6,262 (2010: 4,517) boosted by the impact of MACTEC and ten months' impact of BCI.

 

Average number of employees


2011

2010

     Change (%)

Natural Resources


12,239

10,704

+14

Power & Process


7,042

6,536

+8

Environment & Infrastructure


6,262

4,517            

+39

Centre


214

216

(1)

Group


25,757

21,973

+17

 

PAGE 4

 

Outlook

The priority for 2012 remains to grow the business by continuing to deliver for customers whilst investing in AMEC's people.

 

AMEC is on track to deliver double-digit underlying revenue growth in 2012, despite the continued macro economic uncertainty. The strength of the order intake during 2011, the continued demand for AMEC's services and the on-going customer investment in AMEC's core markets are driving growth expectations. The full-year impact of acquisitions made in 2011 will further boost revenue growth. In addition, the pipeline for further acquisitions in 2012 remains strong.

 

Overall margins are expected to reduce somewhat, impacted by a shift in business mix and an increase in procurement activities for strategic customers.

 

Management remains focused on the Vision 2015 strategy and now expects to achieve earnings per share of greater than 100 pence ahead of 2015. 

 

PAGE 5


Segmental review

Natural Resources

Natural Resources provides engineering, project management and asset support services, particularly in upstream oil and gas, unconventional oil and in surface mining.  It has particular expertise in large and complex projects in growth regions and in extending the life of assets.

Approximately 71 per cent of 2011 revenue was generated by asset development (capex) activities, with the remainder in asset support (opex) (2010: capex 74 per cent; opex 26 per cent).

The revenue can be analysed by market and sectors as shown below:

Natural Resources


2011

2010

Oil & Gas market




a

Oil & Gas

(%)

53

47

a

Unconventional Oil & Gas

(%)

23

35

Minerals & Metals market

(%)

24

18

 

Oil & gas activities are concentrated mainly in the upstream segment (90 per cent of 2011 revenues), with the balance being in downstream.

Natural Resources


2011

Underlying business

Currency exchange

Net acquisitions

2010

Revenue

(£m)

1,742

68

10

61

1,603

     Y-on-Y change

(%)

+9

+4

+1

+4


EBITA

(£m)

192

12

nil 

+1

179

     Y-on-Y change

(%)

+7

+7

nil 

nil 


EBITA margin

(%)

11.0




11.1

     Y-on-Y change

(bps)

(10)





Order book

(£bn)

2.2




1.9

     Y-on-Y change

(%)

+17





 

Revenue in the Natural Resources division improved 9 per cent to £1,742 million through a mix of organic growth and acquisitions. The oil and gas and mining sectors were the primary drivers, both up compared to 2010. This was offset by a decline in oil sands activities due to the phasing of work on Imperial Oil's Kearl project, which peaked in 2010 at the height of the first phase.

EBITA (£192 million) was up 7 per cent, and the EBITA margin remained broadly stable at 11.0 per cent.

Contract wins in 2011reflect continued customer spending in core energy and commodity markets, the strength of UK North Sea activity and AMEC's work on strategic customer relationships. They included:        

 

PAGE 6

 

Oil & Gas

▪    BP: engineering and project management services for the main platform design for Clair Ridge, west of Shetland, following the completion of the conceptual engineering studies and the define phase of the same project, UK North Sea

▪    Centrica: asset support contract for a mixture of manned and unmanned offshore assets, as well as onshore gas terminals, East Irish Sea

▪    ConocoPhillips: two-year contract extension to provide operations and maintenance services to the Bayu Undan facilities, Indonesia East Timor Sea

▪    GDF SUEZ: front end engineering design for the Cygnus gas field development, UK North Sea

▪    MWCC: designing and delivering components of the Marine Well Containment Company's (MWCC) expanded containment system, US Gulf of Mexico

Mining

▪    Bannerman Resources: definitive feasibility study for the Etango uranium projects, Namibia

▪    Fortescue Metals Group: (AMEC JV) engineering, procurement, construction (EPC) contract for the Cloudbreak ore handling wet front end project, Australia

▪    Paladin Energy: definitive feasibility study for the Langer Heinrich uranium projects, Namibia

In addition, in January 2012 AMEC was awarded extensions to two asset support contracts worth £70 million over three years for SABIC.

Other on-going projects include detailed engineering and procurement for ConocoPhillips' existing Judy platform and the hook-up and commissioning of the new Jasmine facilities in the North Sea, a long-term project management contract for KOC in Kuwait, and on-going oil sands work for Imperial Oil, Syncrude, Teck, Suncor and Connacher among others. 

Order intake has improved with oil and gas and mining activity driving the increase.  The order book at 31 December 2011 was up 17 per cent at £2.2 billion.

The outlook for growth in 2012 is good. This is driven by positive trends in the oil and gas market, particularly within the UK North Sea and the Gulf of Mexico, and the minerals and metals market, with oil sands volumes also expected to improve.

The shift in business mix and the increase in procurement activities for strategic customers will impact margins.

 

Power & Process

Power & Process is principally based in the UK and Americas and provides engineering, project management and asset support services in the clean energy market. It has a leading position in the nuclear sector, particularly in the UK, where its services are well-balanced across the asset lifecycle.

PAGE 7

Capex services generated 49 per cent of revenue with the rest in opex (2010: capex 48 per cent, opex 52 per cent).

The revenue can be analysed by market and sectors as shown below:

Power & Process


2011

2010

Clean Energy market




a

Renewables / Bioprocess

(%)

32

19

a

Nuclear

(%)

31

30

a

Conventional Power

(%)

21

34

Transmission & Distribution

16

17

 

Power & Process


2011

Underlying business

Currency exchange

Acquisitions

2010

Revenue

(£m)

849

50

(3)

nil

802

     Y-on-Y change

(%)

+6

+6

nil

nil


EBITA

(£m)

72

7

nil 

nil 

65

     Y-on-Y change

(%)

+11

+11

nil 

nil 


EBITA margin

(%)

8.5




8.1

     Y-on-Y change

(bps)

+40





Order book

(£bn)

1.0




1.0

     Y-on-Y change

(%)

+5





Revenue increased 6 per cent, to £849 million in 2011 (2010: £802 million), reflecting increased activity in North America and in the UK nuclear sector in particular.

EBITA was up 11 per cent, to £72 million (2010: £65 million), with the Sellafield decommissioning joint venture contributing £20 million (2010: £16 million). The overall EBITA margin improved by 40 basis points to 8.5 per cent.

Contract awards in 2011 reflect the focus on the clean energy market, particularly nuclear where AMEC has benefited from an increase in safety engineering work.

 

Nuclear

▪    Magnox Limited: four-year contract to provide hazard reduction services at eight nuclear sites across UK

▪    Magnox Limited: two-year contract to provide specialist nuclear and safety case services across the Nuclear Decommissioning Authority's 10 Magnox sites, UK

▪    Sellafield: radiological, environmental and site characterisation support in Cumbria, UK

▪    URENCO: three-year contract to provide the client with a range of nuclear services, UK

PAGE 8

Bioprocess

▪    INEOS Bio: selected to be global license support engineering firm - for the licensing programme roll-out for bioenergy facilities using INEOS Bio's advanced waste-to-bioenergy technology

▪    Sappi: EPCM services for its GoCell project, South Africa

In addition, National Grid awarded the AMEC JV a five-year extension to the Electricity Alliance West contract worth £650 million, to upgrade overhead power lines and underground cables across the western half of England and all of Wales. The award was announced in January 2012.

In the North American clean energy market, good progress is being made on the Sapphire Energy biofuel project in the US and new contracts were signed for the 99 MW Erieau wind project and the 10 MW Brockville PV solar project in Canada.

The order book at 31 December 2011 was £1.0 billion, (2010: £1.0 billion).  The tier one Sellafield decommissioning contract, as it is an equity accounted joint venture, is not included in these figures.

Progress continues to be made on the resolution of the 'older contracts', which, as previously referenced, do not meet the revised criteria of low-risk services with high value-add. 

Looking ahead, activity levels are expected to improve through the ongoing customer focus and the growing market for AMEC's engineering, project management and consultancy services in the clean energy market.

 

Environment & Infrastructure

Environment & Infrastructure (previously Earth & Environmental) is a leading international environmental and engineering consulting organisation.  It works across all AMEC's markets and provides a complementary offering to many customers common to the Natural Resources or Power & Process divisions.

The division provides services from approximately 250 offices, mainly in North America, but with an increasing presence in the growth markets of Europe, South America and Australasia. 

Revenues can be analysed by market and sector as follows:

Environment & Infrastructure


2011

2010

Oil & Gas market

(%)

14

16

Minerals & Metals market

(%)

11

9

Clean Energy market

(%)

2

2

Environment & Infrastructure market




a

Government services

(%)

25

29

a

Industrial / Commercial

(%)

20

16

a

Transportation / Infrastructure

(%)

16

15

a

Water / Municipal

(%)

12

13

PAGE 9

 

Environment & Infrastructure


2011

Underlying business

Currency exchange

Acquisitions

2010

Revenue

(£m)

722

(14)

(11)

154

593

     Y-on-Y change

(%)

+22

(2)

(2)

+26


EBITA

(£m)

66

(2)

(1)

14

55

     Y-on-Y change

(%)

+21

(3)

(2)

+26


EBITA margin

(%)

9.2




9.2

     Y-on-Y change

(bps)

nil





Order book

(£bn)

0.48




0.27

     Y-on-Y change

+78





 

 

Revenue increased by 22 per cent to £722 million in 2011 (2010: £593 million), driven by the MACTEC acquisition.   There were lower levels of activity in the federal sector, but performance in the industrial / commercial and mining sectors was strong. 

EBITA increased 21 per cent in 2011 to £66 million (2010: £55 million), driven by the North American acquisitions. Overall EBITA margin was maintained at 9.2 per cent (2010: 9.2 per cent).

The order book improved to £0.5 billion (31 December 2010: £0.3 billion) largely due to the inclusion of MACTEC. Environment & Infrastructure conducts a large number of small contracts with the average contract size approximately $40,000.  Some of the on-going contracts include:

▪    Northumbrian Water Limited: technical and commercial services framework contracts to provide multidisciplinary engineering, contract supervision services and associated environmental support as well as contract and cost management services, UK

▪    Arcelor Mittal: investigation, design and implementation services across a range of distinct projects, from annual dyke raises for the disposal facility to a culvert replacement programme across the AMMC's rail line, Canada.

In 2012, revenue growth is expected to continue, boosted by the MACTEC acquisition and a more favourable outlook for both the natural resource sectors and the North American economy in general.

Investment and other activities

This principally comprises the Incheon Bridge PPP project in Korea, now in operational phase, the Lancashire Waste PPP project, and AMEC's residual UK wind development activities.  Revenue was £7 million (2010: £7 million) with EBITA £3 million (2010: £6 million).

PAGE 10

 Board changes

As previously announced, John Connolly, formerly Global Chairman of Deloitte Touche Tohmatsu and Chief Executive of Deloitte UK, joined the board as Chairman on 1 June 2011. 

Peter Byrom retired from the board at the end of his appointment term as non-executive director on 9 February 2011.

Following the resignation of Eleanor Evans, Christopher Fidler is Acting Company Secretary, until a successor is appointed.

 

Financial review

Geographical analysis

The group's largest market was the UK with 30 per cent of revenue (2010: 29 per cent), driven by oil and gas, nuclear, power and environmental services. Canada was the group's largest market in 2010, but in 2011 revenue was affected by the decline in oil sands activity, as previously referenced.

Administrative expenses

Administrative expenses increased by £2 million to £209 million (2010: £207 million) as a result of acquisitions during the period. The impact was partially offset by a reduced charge in respect of share-based payments.

Net financing income

Net financing income of £16 million was £1 million higher than last year (2010: £15 million) and included bank interest of £4 million (2010: £6 million), net interest on pensions assets and liabilities of £9 million (2010: £7 million) and foreign exchange gains and other items of £3 million (2010: £2 million).

The average interest rate received was approximately 0.8 per cent compared to 0.9 per cent in 2010.

In addition, AMEC's share of interest payable of equity accounted joint ventures was £4 million (2010: £4 million).

Taxation

Continuing operations

The group's effective tax rate in 2011 for the continuing businesses (including tax attributable to joint venture interests) before exceptional items and excluding intangible amortisation was 24.1 per cent (2010: 25.9 per cent). The reduction principally reflects the benefit of previously unrecognised tax losses, decreases in statutory tax rates, the agreement of historical items with various tax authorities and more proactive management.

PAGE 11

The tax rate in 2012 and beyond is expected to be in the mid-20s.

Deferred tax

At 31 December 2011, the group had deferred tax assets of £72 million (2010: £60 million) arising primarily from short-term timing differences relating to provisions, property, plant and equipment, retirement benefits and tax losses, offset by liabilities in respect of intangible assets.

Changes to reporting allocations

In 2011 the allocation of certain items was changed:

▪    The UK Asset Support business was transferred from Power & Process to Natural Resources

▪    The net interest on pension assets and liabilities and the net interest within equity accounted JVs were transferred from EBITA to net financing income.

These were reallocations only and there was no overall impact to profit before tax or earnings.

Financial position and net cash

The group remains in a strong financial position, with net cash as at 31 December 2011 of £521 million (2010: £740 million).

Cash generated from operations in 2011 was £209 million (2010: £172 million). After adjusting for exceptional items and discontinued operations, legacy settlements, pension payments in excess of amounts recognised in the income statement and dividends received from joint ventures, operating cash flow was £267 million (2010: £219 million).

Going concern

The directors are satisfied that the group has adequate resources to operate for the foreseeable future.

Intangible amortisation and goodwill impairment

The charge of £39 million for 2011 (2010: £25 million) includes intangible amortisation of £37 million and goodwill impairment of £2 million. Intangible amortisation relates to capitalised software and intangible assets acquired as part of the group's expansion programme. The 2011 charge is £12 million higher than the prior year (2010: £25 million) with the increase due to the acquisitions in the year and the full-year impact of acquisitions in 2010.

In line with IAS 36 'Impairment of assets', annual impairment reviews have been performed on the goodwill carried on the balance sheet.  As a result of the disposal of a small business during the year, there was a £2 million impairment charge in 2011 (2010: £nil).

Exceptional items

One small business was divested during 2011 and there were various adjustments to existing provisions in respect of prior year disposals.  Other exceptional items include transaction and deferred compensation costs on acquisitions, costs associated with exiting the group's activities

PAGE 12

in Libya and restructuring costs in Environment & Infrastructure following the acquisition of MACTEC.

In aggregate, there was a post-tax exceptional gain of £25 million (2010: £45 million).

Legacy issues

No new significant contingent liabilities were added in 2011. Provisions currently held for future costs of litigation total £54 million (2010: £50 million).

Balance sheet highlights

Key movements in the balance sheet are discussed below:

Intangible assets

The net book value of intangible assets as at 31 December 2011 was £848 million (2010: £621 million) comprising goodwill £725 million, software £27 million and other acquired intangible assets £96 million.

The increase in goodwill of £164 million, primarily relates to the acquisitions in the year of Zektingroup, qedi, BCI and MACTEC.  Other acquired intangible assets include the value of customer relationships, brand names/trademarks, non-compete agreements and order backlogs of acquired businesses. 

Working capital

Days' sales in inventory/WIP and receivables are as follows:


2011


2010

Days

Days

Group

80


78

 

The increase in days' sales in inventory/WIP and receivables reflects the increase in activity during the second half of the year compared with the same period in 2010.

Derivative financial instruments

As at 31 December 2011, there were derivative financial instruments with a net liability of £14 million (2010: £37 million) on the balance sheet.  This net liability represents the fair value of foreign exchange contracts used to hedge the cash flows of foreign currency contracts and cross currency instruments used to hedge the net investment in overseas subsidiaries.

Distributable reserves

As at 31 December 2011, distributable reserves of AMEC plc stood at £820 million (2010: £696 million). 

PAGE 13

  


£million

As at 1 January 2011

696 

Dividends approved during 2011

(86)

Dividends received by subsidiaries

188

Other movements

22

As at 31 December 2011

820

 

A dividend of £19 million received from a subsidiary company in a prior period is not considered to be distributable.

Pensions

The IAS 19 surplus of the principal UK pension schemes at the end of 2011 of £32 million was lower than in 2010 (£63 million) reflecting principally a reduction on the discount rate, which was partly offset by higher than expected asset returns and other actuarial gains. 

The triennial valuation of the main UK schemes was finalised during 2011. The actuarial assumptions adopted for IAS 19 purposes as at 31 December 2011 have been updated in line with the scheme experience identified as part of the triennial valuation. The revised mortality assumption was chosen with regard to the latest available tables, adjusted where appropriate to reflect the experience of the schemes' membership.  The tables adopted are part of the S1 series of tables, taking into account each member's year of birth adjusted by an age rating of -½ year for males and +¼ year for females, and allowing for an underpin of 1.25 per cent per annum improvements in longevity.  For a male/female aged 65 in 2011, these tables show a life expectancy of 22.7/24.1 years. For a male/female aged 45 in 2011, these tables show a life expectancy from age 65 of 24.5/26.1 years.

In association with the Trustees of the Schemes, AMEC will continue to monitor scheme mortality experience and will revise assumptions as appropriate.

Contributions of £28 million were paid to the company's defined benefit schemes during the year (2010: £22 million).  This included special contributions agreed with the Trustees of £5 million (2010: £5 million). 

There are a number of smaller schemes which are in a deficit position. The combined deficit as at 31 December 2011 was £81 million (2010: £36 million) with the increase in the year being due to an actuarial loss in a Canadian scheme and a deficit on a scheme which was acquired with MACTEC.

PAGE 14

Provisions

Provisions held at 31 December 2011 were £169 million (31 December 2010: £187 million).  During 2011, £36 million of the brought forward provisions were utilised.  As part of the ongoing review of the potential liabilities, £29 million of provisions were released as they were no longer required but an additional £47 million of provisions were created, which included £23 million arising from business combinations matched by a corresponding indemnity asset. 

Provisions are analysed as follows:

As at 31 December 2011

£million

Litigation provisions

54

Indemnities granted to buyers and retained obligations on disposed businesses

66

Insurance, onerous property contracts and provisions to fund joint ventures

49

Total

169

 

  

PAGE 15

CONSOLIDATED INCOME STATEMENT                                                  





Before


Amortisation,



2011

 



amortisation,


impairment and




 



impairment and


exceptional




 



exceptional


items



 



items


(note 3)



Total

 



£ million


£ million



£ million

 

Continuing operations








 









 

Revenue

2

3,261 


- 



3,261 

 









 

Cost of sales


(2,779)


- 



(2,779)

 









 

Gross profit


482 


- 



482 

 









 

Administrative expenses


(209)


(47)



(256) 

 









 

Profit on business disposals








 

and closures


- 




 

 









 

Profit/(loss) before net financing income


273 


(45)



228 

 









 

Financial income


18 




18 

 

Financial expense


(2)




(2)

 









 

Net financing income


16 


- 



16 

 









 

Share of post-tax results of joint ventures


15 


- 



15 

 









 









 

Profit/(loss) before income tax

2

304 


(45)



259 

 









 

Income tax

4

(69)


17



(52)

 









 

Profit/(loss) for the year from continuing








 

operations


235 


(28)



207 

 









 

Profit for the year from discontinued








 

operations

5

-  


25 



25 

 









 

Profit/(loss) for the year


235 


(3)



232 

 









 

Attributable to:








 

Equity holders of the parent







232 

 

Non-controlling interests







-  

 









 








232 

 









 

Basic earnings per share:

6







 

Continuing operations


71.9p





63.3p

 

Discontinued operations


                        -





7.5p

 









 



71.9p





70.8p

 









 

Diluted earnings per share:

6







 

Continuing operations


70.5p





61.9p

 

Discontinued operations


                         - 





7.4p

 









 



70.5p





69.3p

 









 









 

Dividends per share:

7






30.5p

 

 

PAGE 16



CONSOLIDATED INCOME STATEMENT

 





Before


Amortisation,



2010

 



amortisation,


impairment and




 



impairment and


exceptional




 



exceptional


items




 



items


 (note 3)



Total

 



(restated)


(restated)



(restated)

 



£ million


£ million



£ million

 

Continuing operations








 









 

Revenue

2

2,951 


-  



2,951 

 









 

Cost of sales


(2,499)


-  



(2,499)

 









 

Gross profit


452 


-  



452 

 









 

Administrative expenses


(207)


(33)



(240)

 









 

Profit on business disposals and closures


-  


19 



19 

 









 

Profit/(loss) before net financing income


245 


(14)



231 

 









 

Financial income


18 


-  



18 

 

Financial expense


(3)


-  



(3)

 









 

Net financing income


15 


-  



15 

 









 

Share of post-tax results of joint ventures


13 


-  



13 

 









 

Profit/(loss) before income tax

2

273 


(14)



259 

 









 

Income tax

4

(66)


43 



(23)

 









 

Profit for the year from continuing








 

operations


207 


29 



236 

 









 

Loss for the year from discontinued








 

operations

5

(4)


(2)



(6)

 









 

Profit for the year


203 


27 



230 

 









 

Attributable to:








 

Equity holders of the parent







231 

 

Non-controlling interests







(1)

 









 








230 

 









 

Basic earnings/(loss) per share:

6







 

Continuing operations


64.0p





73.0p 

 

Discontinued operations


(1.3)p





(2.1)p

 









 



62.7p





70.9p 

 









 

Diluted earnings/(loss) per share:

6







 

Continuing operations


62.5p





71.3p 

 

Discontinued operations


(1.3)p





(2.0)p

 









 



61.2p





69.3p 

 









 









 

Dividends per share

7






26.5p 

 

 

PAGE 17



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME




 





2011


2010





£ million


£ million








Profit for the year




232 


230 








Actuarial (losses)/gains on defined benefit pension schemes




(71)


21 








Tax on actuarial losses/(gains)




23 


(7)








Exchange movements on translation of foreign subsidiaries





70 








Net gain/(loss) on hedges of net investment in foreign subsidiaries




4 


(11)








Tax on exchange movements




- 


1








Cumulative exchange movements recognised in profit on disposal




- 


(6) 








Cash flow hedges:







  Effective portion of changes in fair value




- 


  Transferred to the income statement




- 









Tax on effective portion of changes in fair value of cash flow hedges




- 


(1)














Other comprehensive income



(44)


69 







Total comprehensive income



188 


299 








Attributable to:







  Equity holders of the parent




188 


300 

  Non-controlling interests





(1)








Total comprehensive income



188 


299 

 

 

 

 

 

 

PAGE 18

 

 

 

 

CONSOLIDATED BALANCE SHEET




31 December


31 December


Note


 2011


2010




£ million


£ million







ASSETS






Non-current assets






Property, plant and equipment



35 


32 

Intangible assets

8


848 


621 

Interests in joint ventures



41 


43 

Derivative financial instruments




Retirement benefit assets



32 


63 

Other receivables

9


23 


Deferred tax assets



72 


60 







Total non-current assets



1,051 


820 







Current assets






Inventories



4 


Trade and other receivables



844 


697 

Derivative financial instruments




Current tax receivable



31 


Bank deposits (more than three months)



28 


196 

Cash and cash equivalents



493 


544 







Total current assets



1,404 


1,443 







Total assets



2,455 


2,263 







LIABILITIES





Current liabilities





Trade and other payables



(758)


(685)

Derivative financial instruments



(15)


(27)

Current tax payable



(55)


(34)







Total current liabilities



(828)


(746)













Non-current liabilities






Trade and other payables

9



(7)

Derivative financial instruments



(3)


(12)

Retirement benefit liabilities



(81)


(36)

Provisions

10


(169)


(187)







Total non-current liabilities



(253)


(242)







Total liabilities



(1,081)


(988)







Net assets



1,374 


1,275 













EQUITY






Share capital



169 


169 

Share premium account



101 


101 

Hedging and translation reserves



131 


127 

Capital redemption reserve



17 


17 

Retained earnings



955 


858 







Total equity attributable to equity holders of the parent



1,373 


1,272 







Non-controlling interests



1 








Total equity



1,374 


1,275 

 

 

PAGE 19



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 2011


169 


101 


(4)


131 


17 


858 


1,272 



1,275 




















Profit for the



















year


-


-


-


-


-


232 


232 



232 




















Actuarial losses on



















defined benefit



















pension schemes


-


-


-


-


-


(71)


(71)



(71)

Tax on actuarial losses


-


-


-


-


-


23 


23 



23 

Net gain on hedges of



















net investment in



















foreign subsidiaries


-


-


-



-



4 



4 




















Other comprehensive








         











income for the year


-


-


-


       4


-


(48)


(44)



(44)







































Total comprehensive



















income for the year


-


-


-



-


184 


188 



188 




















Dividends


-


-


-


-


-


(86)


(86)



(86)

Equity-settled share



















based payments


-


-


-


-


-


11 


11 



11 

Acquisition of shares



















by trustees of the



















Performance Share



















Plan


-


-


-


-


-


(11)


(11)



(11)

Utilisation of treasury



















shares


-


-


-


-


-


11 


11 



11 

Acquisition of  treasury



















shares


-


-


-


-


-


(12)


(12)



(12)

Business disposal


-


-


-


-


-




(2)


(2)




















As at 31 Dec 2011


169 


101 


(4)


135 


17 


955 


1,373 


1 


1,374 







































PAGE 20



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 2010


169


101 


(5)


77  


17 


663 


1,022 



1,025 




















Profit/(loss) for the



















year







231 


231 


(1)


230 




















Actuarial gains on



















defined benefit



















pension schemes







21 


21 



21 

Tax on actuarial gains







(7)


(7)



(7)

Exchange movements



















on translation of



















foreign subsidiaries





70 




70 



70 

Net loss on hedges of



















net investment in



















foreign subsidiaries





(11)




(11)



(11)

Tax on exchange



















movements










Cumulative exchange



















movements recognised



















in profit on disposal





(6)




(6)



(6)

Effective portion of



















changes in fair value



















of cash flow hedges




1







Transferred to the



















income statement




1



         -





Tax on effective portion



















of changes in fair value



















of cash flow hedges




(1)





(1)



(1)




















Other comprehensive



















income for the year





54 



14 


69 



69 







































Total comprehensive



















income for the year





54 



245 


300 


(1)


299 




















Dividends







(58)


(58)



(58)

Shares issued








 ‑ 



Equity-settled share



















based payments







14 


14 



14 

Tax on equity-settled



















share based payments







5  




Acquisition of shares



















by trustees of the



















Performance Share



















Plan







(5)


(5)



(5)

Utilisation of treasury



















shares










Acquisition of  treasury



















shares







(8)


(8)



(8)




















As at 31 Dec 2010


169 


101 


(4)


131 


17 


858 


1,272 



1,275 







































PAGE 21


 

CONSOLIDATED CASH FLOW STATEMENT




2011


2010

(restated)


Note


£ million


£ million

Cash flow from operating activities






Profit before income tax from continuing operations



259 


259 

Loss before income tax from discontinued operations

5


(2)


(18)







Profit before income tax



257 


241 

Financial income



(18)


(18)

Financial expense



2 


Share of post-tax results of joint ventures



(15)


(13)

Intangible amortisation and goodwill impairment



39 


25 

Depreciation



10 


12 

Loss/(profit) on disposal of businesses



2 


(4)

Difference between contributions to retirement benefit






schemes and current service cost



(7)


(3)

Equity settled share-based payments



11 


14 










281 


257 







Increase in inventories



(3)


(1)

Increase in trade and other receivables



(62)


(165)

(Decrease)/increase in trade and other payables and provisions



(7)


81 







Cash generated from operations



209 


172 

Tax paid



(36)


(38)







Net cash flow from operating activities



173 


134 







Cash flow from investing activities






Acquisition of businesses (net of cash acquired)



(254)


(94)

Funding of joint ventures



(12)


(16)

Purchase of property, plant and equipment



(12)


(6)

Purchase of intangible assets



(11)


(7)

Movements in short-term bank deposits



168 


(66)

Disposal of businesses (net of cash disposed of)



(9)


12 

Disposal of property, plant and equipment



1 


Interest received



6 


Dividends received from joint ventures



17 


17 

Amounts paid on maturity of net investment hedges



(20)








Net cash flow from investing activities



(126)


(153)







Net cash flow before financing activities


47 


(19)







Cash flow from financing activities






Dividends paid



(86)


(58)

Acquisition of treasury shares (net)



(1)


(6)

Acquisition of shares by trustees of the Performance Share Plan



(11)


(5)







Net cash flow from financing activities



(98)


(69)







Decrease in cash and cash equivalents



(51)


(88)

Cash and cash equivalents as at the beginning of the year



544 


612 

Exchange gains on cash and cash equivalents



- 


20 







Cash and cash equivalents as at the end of the year



493 


544 







Cash and cash equivalents consist of:






Cash at bank and in hand



130 


177 

Bank deposits (less than three months)



363 


367 







Cash and cash equivalents as at the end of the year



493 


544 

Bank deposits (more than three months)



28 


196 







Net cash as at the end of the year



521 


740 







PAGE 22

 

 

NOTES

 

1. ACCOUNTING STANDARDS ADOPTED DURING THE YEAR AND BASIS OF PREPARATION

 

In accordance with EU law (IAS Regulation EC 1606/2002), the preliminary results have been prepared in accordance with International Financial Reporting Standards ('IFRS') adopted for use in the EU as at 31 December 2011 ('adopted IFRS'), International Financial Reporting Interpretations Committee ('IFRIC') interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

Accounting standards adopted in the year

 

There are no IFRS or IFRIC interpretations effective for the first time this financial year that have had a material impact on the group.

 

Basis of preparation

 

The financial information set out herein does not constitute the company's statutory accounts for the years ended 31 December 2011 or 2010 but is derived from those accounts.  The financial information has been prepared using accounting policies consistent with those set out in the annual report and accounts for the year ended 31 December 2010.  Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 will be delivered in due course.  The auditors have reported on those accounts; their reports were 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 any statements under Section 498 (2) or (3) of the Companies Act 2006.

 

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

 

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

 

Some accounting 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 defined benefit pension schemes under IAS 19 'Employee benefits', for long-term contracts under IAS 11 'Construction contracts' and IAS 18 'Revenue recognition' and for provisions under IAS 37 'Provisions, contingent liabilities and contingent assets'.

 

The results for 2011 were approved by the board of directors on 21 February 2012 and are audited.

 

The annual report and accounts for the year ended 31 December 2011 will be posted to shareholders on 14 March 2012.

 

The Annual General Meeting (AGM) will take place on 19 April 2012.

 

Subject to approval by shareholders at the forthcoming AGM the final dividend will be paid on 2 July 2012 to shareholders on the register of members at the close of business on 1 June 2012.

 

Interim, preliminary and all other announcements notified to the London Stock Exchange are available on the internet at amec.com.

 

PAGE 23



NOTES continued

 

Restatements

 

The accounts for the year ended 31 December 2010 have been restated to present the results rounded to the nearest million rather than to one decimal place.  Following this change in presentation, all calculated numbers, for example earnings per share, continue to be calculated on the underlying numbers to one decimal place precision.

 

As announced in March 2011, the consolidated income statement for the year ended 31 December 2010 has been restated to present pension financing income within net financing income rather than within administrative expenses.  The purpose of this restatement is to report the results of financing the pension schemes within net financing income.  The impact of this restatement is an increase in administrative expenses of £7 million for the year ended 31 December 2010.  Net financing income has increased by the same amount.  The restatement has no impact on the group's reported profit.

 

As announced in March 2011, the segmental analysis of the results for the year ended 31 December 2010 has been restated, in line with the group's internal reporting structure, to present the UK asset support business within the Natural Resources division rather than the Power & Process division.  In addition, the segmental analysis has also been restated to include net financing income of equity accounted joint ventures within net financing income not EBITA. 


The net impact of the above restatements is to increase revenue and EBITA of the Natural Resources division by £82 million and £4 million respectively for the year ended 31 December 2010.  Revenue and EBITA of the Power & Process division has reduced by £82 million and £10 million respectively. In addition, EBITA of the Investments and other activities segment and net financing income have both increased by £3 million.

 

2.  SEGMENTAL ANALYSIS OF CONTINUING OPERATIONS

 

AMEC has three divisions: Natural Resources, Power & Process and Environment & Infrastructure, that offer high-value consultancy, engineering and project management services to the world's oil and gas, minerals and metals, clean energy and environment and infrastructure sectors.  Each of the divisions is considered to be a reportable segment.  Following the acquisition of MACTEC, the Earth & Environmental division has been rebranded to Environment & Infrastructure to better reflect the services and scope of the current business and its global growth strategy.  AMEC's Chief Executive together with the senior management team constitute the chief operating decision maker, and they regularly review the performance of these three divisions as well as the Investments and other activities segment.  The Investments and other activities segment principally comprises the Incheon Bridge PPP project in Korea now in the operational phase, the Lancashire Waste PPP project being commissioned and AMEC's remaining UK Wind development activities.  Details of the services offered by each division and the end markets in which they operate are given in the segmental review on pages 6 to 10.

 


    Revenue


Profit/(loss)



2011


2010


2011


2010

 





(restated)




(restated)

 



£ million


£ million


£ million


£ million

 










 

Class of business:









 

Natural Resources


1,742 


1,603 


192 


179 

 

Power & Process


849 


802 


72 


65 

 

Environment & Infrastructure


722 


593 


66 


55 

 

Investments and other activities


7 



3 


 










 



3,320 


3,005 


333 

 


305 

 

Internal revenue


(59)


(54)


- 


 










 

External revenue


3,261 


2,951 



 










 

Corporate costs1






(34)


(36)

 

EBITA2






299 


269 

 

Net financing income3






12 


11 

 

Adjusted profit before tax






311 


280 

 

Tax on results of joint ventures4






(7)


(7)

 







304 


273 

 

Intangible amortisation and goodwill









 

impairment

Exceptional items






(39)

(6)


(25)

11 

 










 

Profit before income tax






259 


259 

 










 

 

PAGE 24



2.  SEGMENTAL ANALYSIS OF CONTINUING OPERATIONS continued

 

Revenue is analysed by geographical origin as follows:

 





Revenue







2011


2010







£ million


£ million










United Kingdom






976 


852 

Canada






929 


1,087 

United States






844 


604 

Rest of the World






512 


408 
















3,261 


2,951 

 

 

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

2EBITA is earnings from continuing operations before net financing income, tax, intangible amortisation and goodwill impairment and pre-tax exceptional items of £273 million (2010: £245 million) but including joint venture EBIT of £26 million (2010: £24 million).

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

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







2011


2010







£ million


£ million










      EBIT






26 


24 

      Net financing income






(4)


(4)

      Tax






(7)


(7)
















15 


13 

 

3.  AMORTISATION, IMPAIRMENT AND EXCEPTIONAL ITEMS

 



2011


2010 



£ million


£ million 






Continuing operations:





      Administrative expenses - exceptional items

(8)


(8)

      Administrative expenses - intangible amortisation and goodwill impairment

(39)


(25)



(47)


(33)

Profit on business disposals and closures


2 


19 



(45)


(14)

Taxation credit on exceptional items of continuing operations

6 


36 

Taxation credit on intangible amortisation and goodwill impairment

11 




17 


43 

Post-tax amortisation, impairment and exceptional items





of continuing operations


(28)


29 

Exceptional items of discontinued operations (post-tax)


25 


(2)

Post-tax amortisation, impairment and exceptional items


(3)


27 

 

PAGE 25



3.  AMORTISATION, IMPAIRMENT AND EXCEPTIONAL ITEMS continued

 

Post-tax exceptional profits for 2011 are further analysed as follows:

 










2011
















Profit/








Profit in


(loss) on






Profit/


respect of


business


Other




(loss) on


business


disposals


exceptional




disposals


closures


and closures


items


Total


£ million


£ million


£ million


 £ million


£ million











Continuing operations


2 


2 


(8)


(6)

Discontinued operations

(2)


- 


(2)



(2)

(Loss)/profit before tax

(2)


2 


- 


(8)


(8)

Tax

27 


1 


28 


5 


33 

Profit/(loss) after tax

25 


3 


28 


(3)


25 

 

Adjustments to provisions held in respect of businesses sold in prior years, including the release of a tax provision relating to the disposal of AMEC's Built Environment businesses in 2007 resulted in a post-tax profit on disposal and closures of £28 million.

 

Other exceptional losses of £8 million include IFRS 3 acquisition, transaction and deferred compensation costs along with the costs of exiting the group's activities in Libya and restructuring costs in the Environment and Infrastructure segment following the acquisition of MACTEC.  Transaction costs of £3 million have been incurred in the year.

 

Post-tax exceptional profits for 2010 are further analysed as follows:

 










2010
















Profit/








Profit in


(loss) on






Profit/


respect of


business


Other




(loss) on


business


disposals


exceptional




disposals


closures


and closures


items


Total


£ million


£ million


£ million


 £ million


£ million











Continuing operations

13 


6


19 


(8)


11 

Discontinued operations

(9)


-


(9)


(5)


(14)

Profit/(loss) before tax


6


10 


(13)


(3)

Tax

45 


-


45 



48 

Profit/(loss) after tax

49 


6


55 


(10)


45 

 

The disposal of AGRA Foundations Limited in 2010, together with adjustments to provisions held in respect of businesses sold in prior years and foreign exchange movements on provisions established on the disposal of SPIE, resulted in the pre-tax profit on business disposals and closure of £10 million. The tax credit of £45 million in respect of profit on disposals includes the release of a provision of £36 million relating to the disposal of AMEC's UK Wind Developments business in 2008, and results in a post-tax profit on disposals and closures of £55 million in the year.

 

Other exceptional losses of £13 million include transaction costs of £4 million, elements of deferred consideration on acquisitions of £4 million, and certain legacy settlements of £6 million.

 

 

4.  INCOME TAX

 

The group's effective tax rate in 2011 for the continuing businesses (including tax attributable to joint venture interests) before exceptional items and excluding intangible amortisation was 24.1 per cent (2010: 25.9 per cent)

 

On 23 March 2011, in his Budget Speech, the UK Chancellor of the Exchequer announced a reduction in the rate of Corporation Tax from 28 per cent to 26 per cent from 1 April 2011, with further reductions of 1 per cent per annum to 23 per cent by 1 April 2014.  As at 31 December 2011, the reduction in the rate to 25 per cent on 1 April 2012 has been substantively enacted.

 

The change in deferred tax has resulted in a reduction in deferred tax liabilities of £2 million, which has been recognised in the income statement. However, the remaining reductions in the rate have not yet been substantively enacted and therefore the proposed changes are not reflected in the figures reported.

 

The decrease in the rate from 25 per cent to 23 per cent would reduce the balance sheet deferred tax asset by approximately £1 million and would reduce unrecognised deferred tax assets by approximately £1 million. During the period to 2014, AMEC estimates that the effect of the proposed changes to income and equity would be a charge of £1 million to the income statement.

PAGE 26

5.  PROFIT/(LOSS) FOR THE YEAR FROM DISCONTINUED OPERATIONS

 

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

 

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

 



2011


2010



£ million


£ million






Cost of sales and net operating expenses


 


(4)

Loss before exceptional items and income tax


 


(4)

Loss on disposal


(2)


(9)

Attributable tax on loss on disposal



10 

Adjustments in respect of prior year - release of tax provision on disposal of business


24 


Other exceptional items


 


(5)

Attributable tax on exceptional items


 







Profit/(loss) for the year from discontinued operations


25 


(6)






 

6.  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 Transformation Incentive Plan, those held by the qualifying employee share ownership trust and those held in treasury by the company. 

 








2011







2010






Weighted







Weighted







average

shares


Earnings

per





average shares


Earnings per



Earnings


number


share


Earnings


number


share



£ million


 million


pence


£ million


million


pence














Basic earnings from













continuing operations


207 


327


63.3 


237 


326


73.0 

Share options



3


(0.6)



2


(0.5)

Employee share and incentive schemes



4


(0.8)



5


(1.2)














Diluted earnings from













continuing operations


207 


334


61.9 


237 


333


71.3 



























Basic earnings/(loss) from discontinued operations



25
 



327



7.5
 



(6)



326



(2.1)

Share options



3


             -



2


0.1 

Employee share and incentive schemes



4


        (0.1)



5















Diluted earnings/(loss) from













discontinued operations


25 


334


7.4 


(6)


333


(2.0)

 

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



2011


2010



£ million


£ million






Profit for the year from continuing operations


207


236

Loss attributable to non-controlling interests


-


1






Basic and diluted profit from continuing operations


207


237

 

PAGE 27



6.  EARNINGS PER SHARE continued

 

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







2011






2010





Weighted






Weighted







average

shares


Earnings

per





average shares


Earnings per



Earnings


number


share


Earnings


number


share



£ million


 million


pence


£ million


million


pence














Basic earnings from













continuing operations


207 


327


63.3 


237 


326


73.0 














Exceptional items (post-tax)



-


          0.2


(47)



(14.4)














Amortisation and impairment













(post-tax)


28 


-


8.4 


18 



5.4 














Basic earnings from continuing













operations before amortisation,













impairment and exceptional items


235 


327


71.9 


208 


326


64.0 














Share options



3


(0.6)



2


(0.4)














Employee share and incentive 













schemes



4


(0.8)



5


(1.1)














Diluted earnings from continuing













operations before amortisation,













impairment and exceptional items


235 


334


70.5 


208 


333


62.5 














 














Basic earnings from













discontinued operations


25 


327


7.5 


(6)


326


(2.1)














Exceptional items (post-tax)


(25)



(7.5)




0.8 














Basic earnings from discontinued













operations before amortisation,













impairment and exceptional items



327



(4)


326


(1.3)














Share options



3




2















Employee share and incentive 













schemes



4




5















Diluted earnings from













discontinued operations before













amortisation, impairment and













exceptional items



334



(4)


333


(1.3)














 

7.  DIVIDENDS

 

The directors are proposing a final dividend in respect of the financial year ended 31 December 2011 of 20.3 pence per share, which will absorb an estimated £67 million of equity.  Subject to approval, it will be paid on 2 July 2012 to shareholders on the register of members on 1 June 2012.  This dividend has not been provided for and there are no income tax consequences for the company.  This final dividend together with the interim dividend of 10.2 pence (2010: 7.3 pence) per share results in a total dividend for the year of 30.5 pence per share (2010: 26.5 pence).

 




2011




2010


Pence




Pence



Dividends charged to reserves and paid

per share


£ million


per share


£ million

















Interim dividend in respect of 2010 (2010: interim

7.3


24


6.1


20

dividend in respect of 2009)
















Final dividend in respect of 2010 (2010: final dividend

19.2


62


11.6


38

in respect of 2009)

















26.5


86


17.7


58

 

 

PAGE 28

8. INTANGIBLE ASSETS

 


Goodwill


Software


Other


Total


£ million


£ million


£ million


£ million









Cost:








As at 1 January 2011

597 


27


105 


729 

Exchange and other movements

5 


- 


3 


8 

Acquired through business combinations

164 


5


74 


243 

Additions

- 


14


- 


14 

Disposals

(2)


- 


(18)


(20)









As at 31 December 2011

764 


46


164 


974 









Amortisation:








As at 1 January 2011

40 


15


53 


108 

Exchange and other movements

(1)


- 


- 


(1)

Provided during the year*

               2 


4


33 


39 

Disposals

(2)


- 


(18)


(20)









As at 31 December 2011

39 


19


68 


126 









Cost:








As at 1 January 2010

494 


18


72 


584 

Exchange and other movements

46 


2



51 

Acquired through business combinations

59 


- 


30 


89 

Additions


7



Disposal of business

(2)


- 



(2)









As at 31 December 2010

597 


27


105 


729 









Amortisation:








As at 1 January 2010

37 


11


29 


77 

Exchange and other movements


1



Provided during the year


3


22 


25 









As at 31 December  2010

40 


15


53 


108 









Net book value:








As at 31 December 2011

725 


27


96 


848 









As at 31 December 2010

557 


12


52 


621 









As at 1 January 2010

457 


7


43 


507 

 

*Amounts provided during the year include £2 million of goodwill allocated to a small business divested during the year.

 

9. OTHER NON-CURRENT ASSETS AND LIABILITIES

 

Other non-current receivables of £23 million (2010: £nil) represent indemnities received on the acquisition of MACTEC, which are matched by liabilities included within provisions.

 

Trade and other payables of £nil (2010: £7 million) represents the amount of deferred consideration on acquisitions payable in more than one year.

 

PAGE 29



10.  PROVISIONS

 

The nature and measurement bases of the group's provisions are unchanged from those presented in the 2010 annual report and accounts. 




















Onerous










property






Indemnities




contracts






granted and




and




Litigation


retained




provisions




settlement


obligations




to fund 




and future


on disposed




joint




legal costs


businesses


Insurance


ventures


Total


£ million


£ million


£ million


£ million


£ million











As at 1 January 2011

50 


66 


44 


27 


187 

Utilised

(6)


(12)


(4)


(14)


(36)

Charged/(credited) to the income










statement:










  Additional provisions

3 


21 


- 


- 


24 

  Unused amounts reversed

(16)


(9)


(3)


(1)


(29)

Arising on business










combinations

23 


-


- 


- 


23 











As at 31 December 2011

54 


66 


37 


12 


169 











 

11.  ACQUISITIONS AND DISPOSALS

 

The following purchases have been accounted for as acquisitions. MACTEC, Inc contributed £126 million to consolidated revenue and £10 million to consolidated EBITA in the period from the date of its acquisition to 31 December 2011.  None of the other businesses acquired made a material contribution to consolidated revenue and profit in the period from their acquisition to 31 December 2011, nor would they have done in the year ended 31 December 2011 if they had been acquired on 1 January 2011.

 

Intangible assets recognised at fair value on the acquisition of these businesses included brands, trade names, customer relationships, order backlogs and non-compete agreements. 

 

ACQUISITIONS IN 2011

 

QED International Limited

 

On 21 February 2011, the group acquired all of the shares in QED International Limited ('qedi').  qedi is a market-leading project delivery company, focused on delivering specialist completion and commissioning services for major projects in the oil and gas industry.  The acquisition strengthens AMEC's project delivery capability across its key sectors, supports the Vision 2015 strategy, and reinforces AMEC's excellent track record through commissioning into operation.


The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition of qedi were as follows:







Recognised







value







£ million








Intangible assets






14 

Trade and other receivables






10 

Bank loans






(1)

Trade and other payables






(4)

Deferred tax liability






(3)

Net identifiable assets and liabilities






16 

Goodwill on acquisition






17 







33 








Consideration







Cash - paid on completion






28 

           - paid to repay debt












33 








 

PAGE 30



11.  ACQUISITIONS AND DISPOSALS continued

 

QED International Limited continued

 

Goodwill has arisen on the acquisition of qedi primarily through the recognition of the specialist expertise of its workforce in completion and commissioning services for major projects in the oil and gas industry which did not meet the criteria for recognition as intangible assets at the date of acquisition.  The acquisition also provides opportunities for expansion of the qedi business utilising AMEC's geographic coverage.

 

Zektin Group Pty Limited

On 28 February 2011, the group acquired all of the shares in Zektin Group Pty Limited ('Zektingroup').  Zektingroup is an Australian-based specialist engineering consultancy for the oil and gas and resources industries.  The acquisition provides AMEC with oil and gas capability on the east coast of Australia, as well as access to the coal seam methane sector.  This is fully aligned with AMEC's Vision 2015 strategy of assured growth through a strengthened geographic footprint and enhanced capabilities in key sectors.

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition of Zektingroup were as follows:







Recognised







value







£ million

Intangible assets






Trade and other receivables






Cash and cash equivalents






Current tax payable






(1)

Trade and other payables






(3)

Deferred tax liability






(1)

Net identifiable assets and liabilities






Goodwill on acquisition






25 







33 

Consideration







Cash - paid on completion






26 

Contingent consideration












33 

 

Goodwill has arisen on the acquisition of Zektingroup through recognition of the value of its workforce of circa 220 which has strong capabilities and experience in target markets which did not meet the criteria for recognition as intangible assets at the date of acquisition.  The acquisition also provides opportunities for synergies with and cross-selling for existing AMEC businesses.

 

At 31 December 2011, the latest forecasts indicate that due to events that have occurred since the acquisition, the contingent consideration will not be payable and the provision has been released to the income statement.

 

PAGE 31



11.  ACQUISITIONS AND DISPOSALS continued

 

 

MACTEC, Inc

 

On 3 June 2011, the group acquired all of the shares in MACTEC, Inc ('MACTEC').  MACTEC is a leading US engineering and environmental services company which provides a similar wide range of services to the group's existing Environment & Infrastructure business.  The acquisition provides greater access to new customers and regions, is fully aligned with the Vision 2015 strategy and provides the group with the right scale to service the important and growing environmental and infrastructure engineering services market.


The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition of MACTEC were as follows:







Recognised







value







£ million

Property, plant and equipment






Intangible assets






54 

Indemnities received






23 

Trade and other receivables






65 

Cash and cash equivalents






14 

Current tax payable






(2)

Trade and other payables






(45)

Deferred tax liability






(7)

Retirement benefit liabilities






(20)

Provisions






(23)

Net identifiable assets and liabilities






63 

Goodwill on acquisition






120 







183 

Consideration







Cash - paid on completion






123 

          - paid to repay debt






60 







183 

 

Goodwill has been recognised on this acquisition through recognition of the value of its workforce of circa 2,600 mostly highly skilled technical professionals which did not meet the criteria for recognition as intangible assets as at the date of acquisition.  MACTEC's 70 offices are mainly based in eastern USA, complementing the strength of the existing AMEC Environment and Infrastructure business in western USA and Canada.  The acquisition also provides significant opportunities for synergy benefits and cost savings.

 

Other acquisitions

 

Other acquisitions were made in the year for a total consideration of £14 million of which £11 million was paid on completion with the balance of £3 million dependent on the achievement of set targets for labour revenue growth.  The aggregate fair value of identifiable net assets was £6 million, which consisted of £6 million relating to other intangible assets, cash and cash equivalents of £1 million and other net liabilities of £1 million.  Goodwill arising was £8 million and has been recognised as a result of expected synergies.

 

A further £16 million was paid in the period in respect of businesses acquired in 2010 and prior years. 

 

DISPOSAL IN 2011

 

There was one small disposal made during the year. In addition, there were various cash payments in respect of businesses sold in prior years and adjustments to provisions held in respect of prior year disposals resulting in a net loss of £2 million and a net cash outflow of £9 million.

 

PAGE 32



11.  ACQUISITIONS AND DISPOSALS continued

 

ACQUISITIONS IN 2010

 

Currie & Brown (Australia) Pty Limited

 

On 29 January 2010, the group acquired all of the shares in Currie & Brown (Australia) Pty Limited.  The name of this company was subsequently changed to Aquenta Consulting Pty Limited ('Aquenta').  Aquenta trades almost entirely in Australia and is a provider of independent cost, contact and consulting services to the oil and gas, mining, building, transport, utilities and infrastructure sectors.

 

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition of Aquenta were as follows:







Recognised







value







£ million








Property, plant and equipment






Intangible assets






Trade and other receivables






Cash and cash equivalents






Trade and other payables






(7)

Deferred tax liability






(1)

Net identifiable assets and liabilities






Goodwill on acquisition






16 







18 

Consideration







Cash - paid on completion






18 

 

Goodwill has arisen on the acquisition of Aquenta primarily due to its skilled workforce positioned within the strong Australian market which did not meet the criteria for recognition as intangible assets as at the date of acquisition.

 

Entec Holdings Limited

On 29 March 2010, the group acquired all of the shares in Entec Holdings Limited ('Entec').  Entec is a UK-based environmental and engineering consultancy, and was acquired to provide opportunity for leadership positioning in the UK geographical area, particularly in the water services sector.

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition of Entec were as follows:

 







Recognised







value







£ million








Property, plant and equipment






Intangible assets






27 

Trade and other receivables






15 

Cash and cash equivalents






Trade and other payables






(11)

Deferred tax liability






(8)

Net identifiable assets and liabilities






25 

Goodwill on acquisition






43 







68 

Consideration







Cash - paid on completion






51 

           - paid to repay debt






11 

           - contingent consideration












68 








 

 

In addition to the consideration set out above, up to a further £1 million was payable as deferred compensation depending upon continuing employment of three former shareholders for the one year following the acquisition date.
The contingent consideration of £6 million shown above was dependent upon achievement of a profit target for the year following the acquisition date. The profit targets were achieved and the deferred consideration was paid during the year ended 31 December 2011.

Goodwill has arisen on the acquisition of Entec primarily through the acquisition of Entec's expertise in various environmental fields, primarily water services, as well as expected synergies.

 

PAGE 33



 

11.  ACQUISITIONS AND DISPOSALS continued

 

Other acquisitions

 

A number of smaller acquisitions were made in 2010 for £9 million in cash paid on completion.  The aggregate fair value of identifiable net assets was £nil (including cash acquired of £1 million and goodwill arising on the acquisitions was £9 million).

 

Goodwill has been recognised on these acquisitions as a result of their skilled workforces which did not meet the criteria for recognition as intangible assets at the dates of acquisition.

 

A further £9 million was paid in 2010 in respect of businesses acquired in 2009 and prior.  The aggregate goodwill on these acquisitions was reduced by £8 million as the conditions for payment of elements of the deferred consideration were not met.

 

DISPOSAL IN 2010

 

AGRA Foundations Limited

 

AGRA Foundations Limited was sold to Freysinnet Menard Canada Inc (FMC) on 25 June 2010.

 

The carrying value of the assets and liabilities sold and the profit on disposal were as follows:







£ million 








Cash consideration received






19 








Goodwill






Property, plant and equipment






10 

Inventories






Current tax receivable






Trade and other receivables






Trade and other payables






(3)

Cash and cash equivalents






Deferred tax liability






(4)

Net assets sold






18 

Cumulative foreign exchange gains recycled from the translation reserve




Profit on disposal






 

In addition to the disposal of AGRA Foundations, there were various cash payments in respect of businesses sold in prior years and adjustments to provisions held in respect of prior year disposals resulting in a net loss of £2 million and a net cash outflow of £5 million.

 

12.  RELATED PARTY TRANSACTIONS

During 2011 there were a number of transactions with joint venture entities.  The transactions and related balances outstanding with joint ventures are as follows:






Value of transactions

in the year


Outstanding balance

as at 31 December


2011


2010


2011


2010 


£ million


£ million


£ million


£ million 









Services rendered

41


91


16


21 

Provisions of finance

12


10


31


20 









 

13.  BUSINESS THREATS AND OPPORTUNITIES

 

AMEC plc is a focused supplier of consultancy, engineering and project management services to its customers in the world's oil and gas, minerals and metals, clean energy, environment and infrastructure markets.

 

The maintenance of high standards of safety and service remain important in securing repeat business from customers.

 

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

 

Specific risks faced by AMEC are as set out below.

 

PAGE 34

 

 

13.  BUSINESS THREATS AND OPPORTUNITIES continued

 

Risk

Mitigation

Geopolitical and economic conditions

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

 

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

 

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

 

 

The risk 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 current 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, counterparty risk.

Changes in commodity prices

A sustained and significant reduction in oil and gas or commodity prices could have an adverse impact on the level of customer spending in AMEC's markets and consequently represents a risk to organic growth.

 

This risk is mitigated by maintaining a balanced business portfolio of geographies, markets, clients and service offering.

Expansion of global footprint

AMEC's strategy would be affected by a failure to expand the global footprint into higher growth regions and to respond to competitive forces.

 

AMEC's Vision 2015 strategy identified, by geography, the opportunities and risks across the markets in which AMEC operates. The strategy is regularly reviewed for continued relevance and covers both organic growth and mergers and acquisitions.

Mergers and acquisitions

A failure to identify, complete and successfully integrate target acquisitions represents a risk to growth.