TIDMAMFW
RNS Number : 6246E
Amec Foster Wheeler PLC
05 November 2015
Second half trading update
Amec Foster Wheeler announces today its second half trading
update, increasing its cost cutting targets, reducing future
dividend payments and providing guidance for 2016, amidst
continuing tough market conditions:
-- Underlying Scope Revenue year to date in line with expectations
-- Ongoing weak markets: H2 margins now expected to be below H1
-- New group cost savings target increased by $55m to $180m (GBP120m) by 2017
-- Renewed focus on improving performance in, or exiting, low growth areas
-- Reducing ordinary dividend by 50%
Chief Executive Samir Brikho said:
"Amec Foster Wheeler is a high quality and diversified business,
and its financial performance remains relatively resilient, as the
performance so far this year shows. However, we are not immune to
the ongoing tough market conditions and we are managing the
business on the assumption of an extended period of weakness.
For more than a year - across many parts of our business - we
have seen customers reducing capital expenditure and putting more
pricing pressure on the supply chain. We see no sign of these
trends changing.
At our half year results, I said our priorities were to adapt to
challenging markets and to stay lean and efficient. We have decided
to intensify our actions. We have identified, and continue to seek,
further cost savings. We are committed to increasing our focus on
higher growth markets. In parts of our business we need to do
better - so we are progressing plans to improve performance or exit
those markets. We believe that taken together these actions will
underpin our performance.
In light of the ongoing market conditions, we are taking the
prudent step of cutting our ordinary dividend payments by fifty per
cent, starting with the final dividend for 2015."
Year to date trading update (unaudited):
In the nine months to the end of September 2015, Scope Revenue
was GBP3,871m (2014 pro forma: GBP3,940m), 1.8% lower than last
year's pro forma result, and 3.4% lower on a like-for-like
basis.
The order book stood at GBP6.5bn at the end of September,
compared to GBP6.6bn at the half year.
Trading margin trends have continued from the first half, with
ongoing pricing pressure from customers and dilution from mix.
Contracts announced in the second half to date include:
Customer Market Description Country
-------------- -------- -------------------------------------- ------------
SKS O&G Feasibility study for new refinery Malaysia
and petchem complex in Kedah
State
Fortum Clean Design, supply, construction Poland
Zabrze Energy and commissioning of the boiler
island (220MW CFB boiler) with
flue gas cleaning for combined
heat and power plant
Isolux Clean Design and supply of air quality Mexico
Energy systems at Altamira power plant
Canadian Clean Long term remediation project, Canada
Nuclear Energy including building waste management
Laboratories facility at Port Granby
UK MoD E&I 3-year contract to supply regulatory, UK
technical and training services
to MoD nuclear safety authority
Sonatrach O&G Consultancy project to de-bottleneck Algeria
Hassi R'Mei gas field
Zadco O&G 3-year extension to PMC services UAE
contract on Upper Zakum project
Hanwha Clean Design and supply 100MW CFB S Korea
Energy Energy boiler
US Air E&I 6-year contract to support the US
Force AFCAP IV program
Maersk O&G 3-year integrated services contract UK
Oil
Vietnam O&G FEED for Dun Quat refinery upgrade Vietnam
National
Oil &
Gas
Felguera O&G Detailed engineering for Zeebrugge Belgium
LNG terminal expansion
Shandong O&G Engineering, project management, US
Yuhuang procurement and early construction
services for new methanol plant
in Louisiana
CERN Clean Various contracts to provide Switzerland
Energy radiochemical testing
BP O&G 2-year EPC contract to improve UK
living quarters in Eastern Trough
Area Project
NDF Clean Study into managing radioactive Japan
Energy waste at Fukushima
We have made good progress on winning the new Clean Energy
business that we highlighted at the half year results. Since then
we have signed three significant solar projects worth over $650m.
The majority of this is not in the order book at the end of
September, and none of them have been announced yet. The pipeline
of awarded, but not yet sanctioned, projects within GPG remains
above $500m - but with limited recent progress.
Restructuring and cost savings:
Following a further review of our costs, we have identified
additional savings of $55m from SG&A and support functions. We
now expect total cost savings of $180m (GBP120m) from these and the
previously announced integration savings of $125m per annum by
2017.
We are on track to deliver GBP40m of savings, and take an
exceptional charge of around GBP80m, in 2015.
In addition, we are reviewing low growth parts of our business
with a view to driving an underlying improvement or an exit of
those positions.
Longview arbitration:
As previously disclosed, we have been involved in arbitration
with Kvaerner North American Construction Inc arising from GPG's
role in the construction of the Longview power plant in West
Virginia, US in 2011.
On 18 October 2015 the arbitration panel awarded Kvaerner
approximately $74m (approximately GBP48m). Any payment made will be
charged to provisions and will not impact Trading Profit.
Refinancing update:
We will refinance our debt in the next six months, either
through a bond issue in the capital markets or via bank debt.
Earlier this year, the bridge element of the original Foster
Wheeler acquisition facilities was extended to February 2017.
Dividend update:
In light of the ongoing market conditions, we have taken the
prudent step of signalling our intent to reduce our future ordinary
dividend payments.
The interim dividend of 14.8p per share, which was announced at
the half year results, will be paid, as previously announced, on 5
January 2016 to shareholders on the register at the close of
business on 27 November 2015.
The Board now expects to recommend a final dividend for 2015 of
circa 14.2p, half of the equivalent declared in 2014, at the full
year results in March 2016. This would make a full year dividend
for 2015 of 29p.
It is the current intention of the Board that ordinary dividends
in 2016 will be approximately half that declared in 2014, with
approximately 1/3(rd) paid at the interim, and 2/3(rd) as a final
dividend.
Outlook:
For 2015, we expect to see a continuation of recent revenue
trends - with growth in downstream and Middle Eastern Oil & Gas
markets being offset by tougher conditions elsewhere, notably in
upstream Oil & Gas and GPG.
We continue to expect 2015 underlying Scope Revenue to be
modestly lower than last year's pro forma result. Based on current
forecasts there is no longer any year-on-year net benefit from the
translation of North American revenues into Sterling.
The changing mix of work in execution and continued customer
pricing pressure, particularly in the Oil & Gas market, lead us
to believe second half margins will be below those achieved in the
first half of 2015.
Cash generation remains solid, and conversion from Trading
Profit is expected to remain in the historic range of 80-100%.
Year-end net debt will be circa GBP1.1bn. This includes the
impact of weaker H2 trading, adverse currency translation and
assumes that the full payment for the Longview arbitration
mentioned above is made.
Looking ahead to 2016, we expect to see the same trends
impacting our business as in 2015. Growth in the order book towards
GBP7bn between now and the year-end will support low single digit
Scope Revenue growth. The anticipated benefits of the additional
cost saving measures referred to above will partially offset the
continued customer pricing pressure and mix - leading to further
modest Trading Margin dilution.
Contacts:
Julian Walker
Amec Foster Wheeler (media) + 44 (0)20 7429
plc Rupert Green (investors) 7500
Analyst and investor call:
Samir Brikho and Ian McHoul, Chief Executive and Chief Financial
Officer, will host a telephone conference call for analysts and
investors at 7.30am (UK time) today. From the UK, please call 020
3059 8125, outside of the UK, please call +44 (0) 20 3059 8125. Ask
to join the "Amec Foster Wheeler Trading Update" conference call
quoting the conference ID 775864.
A recording and transcript of the call will be made available on
our website as soon as possible after the event.
Analyst consensus estimates:
Regularly updated on our website at
amecfw.com/investors/consensus-estimates.htm
Notes to editors:
Amec Foster Wheeler (www.amecfw.com) designs, delivers and
maintains strategic and complex assets for its customers across the
global energy and related sectors.
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