RNS Number:1250K
AMCO Corporation PLC
17 April 2003
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED
31ST DECEMBER 2002
AMCO CORPORATION PLC ("AMCO" OR "THE GROUP")
CHAIRMAN'S STATEMENT
Introduction
2002 was a very disappointing year.
Although the general structural engineering business has achieved satisfactory
results, the specialised mining roof support activity had reduced profitability
due to falling demand from the UK mining industry.
The property development business has suffered a number of planning and other
delays mainly on the joint venture office development south east of Leeds. No
development losses have been incurred but there have been unrecovered overheads.
Contracting activities were significantly affected by the sudden closure of
Scottish Coal and by two problem contracts in Scotland. The problem contracts
arose due to unanticipated conditions. Some contractual claims will be involved
but none of these have been brought into the 2002 figures. Contracting results
were assisted favourably by the satisfactory settlement of the Konkola
contractual claim in Zambia.
Overall, trading activity resulted in a profit of #0.3m for the year (operating
profit less net interest) but profits on fixed asset disposals of #0.7m and an
FRS 17 pension credit of #0.6m left the Group with a profit for the year of
#1.6m pre tax.
Financial Summary
Turnover remained constant in 2002 at #91m.
Operating profit reduced substantially to #0.5m in 2002 from #2.7m in 2001.
Profits before tax were more than halved to #1.6m.
Earnings per share were 9.8 pence in 2002 against a restated 25.3 pence in 2001.
Net assets at 31st December 2002 were reduced by #12.6m (2001 as restated #5.6m)
on adopting the provisions of FRS 17 on pension liabilities.
Net debt at 31st December 2002 represented 11.9% of net assets before the FRS 17
pension liability (2001 12.3%).
Dividends
Due to the substantial FRS 17 liabilities of #12.6m and the consequent funding
requirements, we do not recommend a dividend in respect of 2002.
Operational Highlights
Structural Steel
Billington Structures worked on two of its largest ever projects, an out-of-town
retail development in Bournemouth and an indoor ski-slope in West Yorkshire.
Other notable contracts included the Centre of Engineering Excellence building
in Rainham, a large distribution warehouse for Ikea at Peterborough and the
Manchester Piccadilly station development. The company has recently been
designated the Specialist Contractor of the Year in the 2003 Building Awards.
Contracting
The major tunnel refurbishment contract for Railtrack at Conisborough was a
substantial engineering achievement for Amco Rail. Amongst many other contracts
Amco Donelon completed the renovation of the Kingsway Mersey Tunnel including
the construction of emergency cross passages. Amco Engineering substantially
completed the Stanley Mills hydro-electric scheme at Perth and it is anticipated
that the experience gained will lead to further mini-hydro schemes.
Tunnelling and allied equipment manufacture
Dosco was successful in securing the sale of further roadheading machines to
Siberia in the Russian Federation and has subsequently opened a subsidiary
company in Kemerovo to provide a base for future sales and spares/service
support. In addition Dosco successfully secured an order from Iran for four new
roadheaders for the Tabas coal mine.
Employees
On behalf of the board of directors I would like to thank our subsidiary company
directors and all of the Group's employees for their efforts in 2002.
Outlook for 2003
There are continuing problems on a major contract in Scotland due to
unanticipated ground conditions. We are satisfactorily resolving the contractual
and financial consequences and hope that the contract will not have a material
effect on 2003 results.
Stuart N. Gordon
Chairman
16th April 2003
CHIEF EXECUTIVE'S REVIEW
Overview
The Group's focus on the development of its construction, structural steel and
property development activities continues, supported by its business interests
in engineering and manufacturing.
Our overall financial performance in 2002 was influenced considerably by a
combination of factors outside our direct control. The implications of
unexpected closures of coal mines at which we held significant ongoing contracts
and the costs associated with severe and unexpected ground conditions
encountered on a major tunnelling contract both contributed to a disappointing
result.
However, it is anticipated that a satisfactory resolution will be achieved in
respect of this problem contract and, provided that the progressive growth of
our specialist construction activities is maintained and with the completion of
property development projects currently in hand, the Group should achieve an
improved performance in 2003.
We will continue to make investment throughout the group to expand the scope of
the services and products we offer and improve the efficiency and profitability
of our businesses.
Health and Safety
The reduction of risks to the health and safety of our employees in the
workplace, the prevention of accidents and ill health and the promotion of a
safe working environment will continue to remain a priority throughout the
group's operations.
In 2003 further initiatives will be adopted as part of our policy and commitment
to continuous improvement in health and safety management and to promote a
health and safety focussed culture throughout our businesses.
Management Systems
2002 saw significant progress made in relation to the review and development of
management systems within the group. Amalgamated Construction, Amco Plastics,
Billington Structures and Hollybank all now operate process based business
management systems delivered electronically using web browser technology.
The successful implementation of knowledge management technology within
Billingtons has led to further investment in this area with a similar system now
being developed for Amalgamated Construction.
Companies within the group have all successfully maintained ISO 9000 (Quality)
and ISO 14000 (Environmental) certification of their management systems during
2002. Billington Structures, Hollybank and Amco Plastics all achieved
certification to the revised Quality Standard BS EN ISO 9001:2000. Amalgamated
Construction achieved this Standard in 2001.
Training and Development
Substantial investment in employee training and development to meet the needs of
the future business has been made in 2002 and will continue throughout 2003.
The ongoing development of employee competence is seen as fundamental to the
achievement of our longer term strategic objectives and as such has formed the
focal point around which our training and development strategy has been
developed. This area received particular attention during 2002 with a
significant amount of groundwork being carried out towards the development of a
Competency Framework encompassing the areas of Management and Leadership Skills,
Technical Capability and Health & Safety.
Both Amalgamated Construction and Billington Structures have made significant
progress towards the construction industry's national initiative of achieving a
fully qualified workforce, with their manager and supervisor qualification
programmes being virtually completed during 2002. In 2003 the focus will be on
the registration and qualification of our directly employed workforce.
Environment
We have continued to pursue our goal of continuous environmental improvement
through the ongoing reduction of the environmental impact of our operations.
Reductions in energy usage and waste have remained our main focus of attention.
The group continues to pride itself on the comprehensive measures implemented
throughout the organisation for the control of our environmental impacts. Not
only do these measures ensure our ongoing compliance with legislation they also
earn acknowledgement from our clients.
The ongoing development and promotion of good environmental practice underpinned
by sound environmental awareness and training is seen to be a key issue in
continued business success.
Construction
In 2002 Amalgamated Construction concentrated its restructured activities within
four multi-disciplined client focused operating divisions: Amco Rail, Amco
Mining, Amco Donelon and Amco Engineering.
The business is now clearly focussed on the Energy, Transportation and
Infrastructure sectors and despite worsening market conditions in the UK coal
mining sector and a substantial reduction in turnover in that sector, an overall
turnover growth of 5% was achieved in the year.
Rail
The Rail Division has retained its position as Minor Works contractor for
Network Rail Eastern and preferred contractor for Great Western's structures
refurbishment programme. Turnover growth of 20% has been achieved and
progressively more clients are being secured within the rail industry. The
completion of the major tunnel refurbishment contract at Conisborough concluded
a substantial engineering achievement and the innovation demonstrated has
provided opportunity for these specialist skills within other regions during the
year and for the future, including the #6 million award of specialist works for
the Strood and Higham Tunnel Relining for Network Rail Southern.
Donelon
Amco Donelon, the specialist tunnelling division, has consolidated its market
re-entry and achieved a 90% growth in turnover in 2002. Major projects activity
in the year included the completion of the Tilbury tunnel refurbishment for
National Grid; the renovation of the Kingsway Mersey Tunnel including the
construction of emergency cross passages; and the commencement of the
Dunfermline Duplication Sewer. Adverse ground conditions have affected progress
and financial recovery at the Dunfermline contract but these problems will be
resolved during 2003. Regional activity was strong in 2002 including contract
awards from United Utilities framework contractors for works in Southport and
Stockport. Other water sector opportunities have predominantly been in Scotland,
including the award and completion of the Don Valley Sewer Tunnel in Aberdeen.
Following the successful pipe-jack carried out for Railtrack Eastern, a further
rail crossing was successfully carried out for Irish Rail in Dublin at the end
of the year. London Underground works have also continued with a variety of
specialist subcontract underground and surface civil engineering works. The
present order book and throughput of opportunity provide confidence that Donelon
will achieve their planned growth during 2003.
Mining
The Mining Division now incorporates deep mining and opencast activities
together with overseas exploratory drilling and mining and minerals consultancy.
The new structure is now gaining the benefits of integration despite the effects
of significant external events in 2002, which included the closures of both the
Longannet and Prince of Wales coal mines and the progressive closure of the
Selby coal mines by 2004. The resultant redundancy and closure costs have
seriously affected the year's result. Notwithstanding these setbacks the term
drilling contract for Ashanti Gold at Siguiri in Guinea, West Africa has become
fully productive during the year and further exploratory drilling works have
been pursued and secured in the region. Mining related contracts have been
successfully undertaken in the UK, Norway and Bulgaria and similar contracts are
targeted for 2003. Coal Authority maintenance, mine related infrastructure,
mineral activities and drilling and blasting at opencast coal sites have all
increased in volume throughout the year and all of the these activities will
provide future business opportunity.
Engineering
The Engineering Division provides a multi-disciplinary capability for major
turnkey projects, term maintenance activities and civil infrastructure works
within our target market sectors. During 2002 maintenance activities increased
by 38% with the award of additional term contracts for the Oil & Pipeline Agency
and for Innogy. Early in 2003 the company was awarded a 5 year #20 million EC&I
term maintenance contract for the Magnox Power Stations by UKAE. The sustainable
energy related business received a setback with previously awarded methane
co-generation sites not proceeding to date, however, the Stanley Mills
hydro-electric scheme at Perth will be completed early in 2003 and several other
mini-hydro schemes are presently at tender stage for potential 2003 execution.
The geotechnical activities have been low volume throughout the year with over
capacity on available work leading to a highly competitive market.
In 2003 Amalgamated Construction will benefit from the momentum now created
within its new operating divisional structure. Further opportunities in
materials handling and mechanical engineering will be created by the transfer of
the Birtley Projects business from Dosco to the Engineering Division. Birtley
will complete a major materials handling installation early in 2003 at West
Burton power station associated with the construction of its new FGD plant and
they are currently undertaking a multi-disciplinary materials handling contract
at Ratcliffe-on-Soar power station.
Structural Steel
Billington Structures enjoyed a record year for turnover in 2002, benefiting
from its emphasis on building long term, mutually beneficial relationships with
a limited number of major clients and contractors.
It worked on its two largest projects awarded to-date, Castlepoint, a #5 million
out-of-town retail development in Bournemouth and X-scape, a #4 million indoor
ski-slope with 'real' snow at Castleford. Other notable contracts included the
Centre of Engineering Excellence building, at the Heart of the Thames Gateway
site in Rainham; one of the largest distribution warehouses ever built in this
country for Ikea at Peterborough; and the Manchester Piccadilly station
development.
The company entered 2003 with a substantial order book, which included a
business park for Sage near Newcastle, the Health & Safety Executive national
laboratories at Buxton, and a production complex for Merck Sharp Dohme at
Hoddesdon.
Billington has been appointed the principal steelwork contractor for the
successful Debut consortium which has been awarded the Ministry of Defence prime
contract for SLAM (Single Living Accommodation Modules), potentially a five-year
building programme on MoD sites throughout England and Wales.
The company continued its programme of improvements to its production facilities
with the installation of new CNC plate fittings machines at its Wombwell and
Yate factories.
In keeping with its and the Group's emphasis on health & safety improvements,
the company has developed an original system of safety barriers for edge
protection on multi-storey steel framed buildings. Called 'easi-edge' the
product range has already been used successfully on several sites including the
Health & Safety Executives new facilities at Buxton.
I have great pleasure in reporting that Billington received industry-wide
recognition for its engineering expertise, IT driven efficiency, focus on health
and safety and for the commitment of its staff by the award of Specialist
Contractor of the Year in the 2003 Building Awards.
Hollybank Engineering continues to specialise in the design and manufacture of
structural steel underground supports, junction structures and ancillaries for
the mining and civil engineering industries. Its business has inevitably been
affected by the reducing demand from the UK coal industry.
Property Development
In 2002 Amco Developments consolidated its position in the Yorkshire and the
North East property development markets and a number of projects are anticipated
to come on-stream during 2003.
Planning was secured on a mixed use scheme in Newcastle with a start on site
planned towards the end of 2003.
Planning approval is awaited for the 90,000 sq ft St Mary's Gate office
development in Sheffield where initial interest in the scheme is very
encouraging. However, a start on site will not be made until a pre-let has been
secured.
Planning approval has now been secured for the 166,000 sq ft Temple Point
business park in Leeds, immediately adjacent to Junction 46 of the M1. Strong
interest has been registered from potential tenants/owner occupiers and works
are planned to start on site early in 2003.
It is anticipated that a retail park in Stockton on Tees will commence late in
2003 and a retail project in Hull will commence once planning has been obtained.
A number of other opportunities are currently in varying stages in the
development cycle.
Engineering
Dosco continues to develop its activities and services away from its traditional
core market which centred on the UK coal mining industry. This market has now
effectively been replaced through its expanding activities servicing the civil
tunnelling, export mining and material handling markets.
Although the business provided by the UK coal mining industry will continue to
be important to the company, Dosco has had to look outside this market to
provide the opportunity for a continuing structured and sustainable growth. The
success achieved in changing its market base now provides a sound basis for
Dosco to continue to expand its products and services around the world.
The drive to access the huge coal mining industry in the Kuzbass region of
Siberia in the Russian Federation, continued in 2002 with the sale of further
roadheaders. To maintain this momentum Dosco has opened a subsidiary company in
Kemerovo to provide a base for sales and spares/service support. We expect this
facility to provide the opportunity for significant future growth in this
region.
In Iran, Dosco successfully secured an order for four new Roadheaders for the
Tabas coal mine, scheduled to be delivered mid-2003.
The increased activity in the UK civil tunnelling industry has provided the
opportunity for Dosco to develop an addition to their already extensive product
range. Their new Cross Passage machine, as it has been named by the industry, is
designed to drive connecting tunnels between two main tunnels satisfying the new
safety requirement for emergency egress in transportation tunnels.
The business undertook the refurbishment of a number of TBMs and shielded
tunnelling machines in 2002 and early in 2003 completed the design and build of
a new 6.7 metre diameter back-hoe in shield for the construction of a section of
the Cross Channel Rail Link.
The company is responding to market opportunities by increasing the assembly
facilities at its Tuxford site to accommodate the new build and refurbishment of
larger and an increased number of shielded tunnelling machines. This investment
will vastly increase Dosco's operational capability to service the civil
tunnelling industry both in the UK and overseas markets.
The material handling division of the company completed 2002 with orders for
Pipe Conveyors in Poland and the Czech Republic and a Crusher for Spain all for
2003 delivery. The new Shredder range of products was launched during 2002 with
the first sale going to Ireland.
Dosco enters 2003 with a significant order book and opportunities for business
growth to a widening UK and world market.
Manufacturing
During 2002 Amco Plastics expanded extrusion production into its new 6,000
sq.ft. factory extension and continued the investment in new extrusion equipment
with the purchase of a new twin screw extrusion line. The company also
strengthened its management team, placing greater emphasis on business and
product development. Significant orders were won to supply ventilation ducting
to the tunnelling industry in the UK and Europe.
In 2003 the company will continue to focus on the expansion of its extrusion
business with the development of new products to serve a wide cross-section of
industry applications. Long term relationships with customers are being fostered
to promote supply partnerships as a platform for stable growth.
Overseas
As a result of the closure of the Konkola Copper Mine in Zambia in 2002 our
joint venture contract with Shaftsinkers was terminated and we subsequently
disposed of our in-country contracting business.
We continue to undertake exploration drilling work overseas, concentrating our
current activities in Guinea.
O. H. Schmill
Group Chief Executive
16th April 2003
FINANCIAL DIRECTOR'S REPORT
Results
Group turnover in the year ended 31st December 2002 reduced marginally to #90.6m
from #91.2m in the previous year. Within this figure Billington Structures and
Amalgamated Construction showed increases which were countered by reductions in
property development with no major developments undertaken in the year.
The Group reported an operating profit for 2002 of #0.5m, a considerable
reduction from the figure of #2.7m 2001. The operating margin reduced in the
year from 3.0% to 0.5%. A number of factors adversely affected the operating
profit in 2002, particularly within Amalgamated Construction. The sudden closure
of Longannet Colliery in Scotland and problems encountered towards the end of
the year on a tunnelling contract in the Amco Donelon division adversely
affected both profitability and cashflow. The continuing rundown of the UK coal
mining industry also adversely affected the profitability of both Dosco and
Hollybank.
The Group generated profits of #0.7m from the disposal of fixed asset
investments in the year. These constituted the disposal of a number of shares
held in the ESOP Trust and the sale of an investment property.
Net interest payable in the year reduced by #0.1m to #0.2m.
The Group has elected to fully implement FRS 17 Retirement Benefits in these
financial statements. This has led to the inclusion of a finance income figure
on the consolidated profit and loss account and the re-statement of the
comparative 2001 figures. The finance income for 2002 is a return of #0.6m and
is the difference between the expected return on the pension scheme assets
(#3.1m) and the interest on the pension scheme liabilities (#2.5m) in the year.
The profit before tax of #1.6m in 2002 is #1.8m below the adjusted profit before
tax figure of #3.4m in 2001.
Taxation
The tax charge of #0.4m in the year equates to an effective corporation tax rate
of 27.3%.
Earnings and dividends per share
Earnings per share were 9.8p in 2002 compared to a restated earnings per share
of 25.3p in 2002. No dividend has been declared or paid during the year.
Capital expenditure
The Group continued to invest in capital equipment with a further #4.1m (2001 -
#3.0m) of capital expenditure in the year of which #1.8m (2001 - #1.5m) related
to replacements in the Group's motor vehicle fleet. Of the balance of #2.3m,
#1.6m was in respect of civil engineering equipment with the rest invested in
plant and equipment throughout the Group. The depreciation charge for the year
was #2.9m and total fixed assets in the Group remained constant at #13.9m as a
result of #1.2m of property and motor vehicle disposals.
Cashflow
The Group had net debt at the end of 2002 of #2.1m unchanged from the net debt
position at the end of 2001. Bank overdrafts have reduced by #0.3m to #1.6m and
cash at bank has increased by #1.3m to #4.6m. Bank loans have increased by #0.9m
and the inception of #2.4m of new finance leases exceeds by #0.6m the #1.8m
repayment of finance leases. The gearing of the Group at the end of 2002 was
11.9% (2001 - 12.3%), calculated on net debt of #2.1m and net assets (excluding
the pension liability) of #17.3m.
Ian Swire
Group Financial Director
16th April 2003
Profit and loss account for the year ended 31st December 2002
2002 2001 (restated)
#000 #000 #000 #000
Turnover including share of joint 89,858 93,666
venture
Increase/(decrease) in work in 1,627 (974)
progress
91,485 92,692
Share of turnover of joint venture (849) (1,493)
Group turnover 90,636 91,199
Raw materials and consumables 33,918 34,891
Other external charges 16,739 13,780
(50,657) (48,671)
39,979 42,528
Staff costs 32,836 32,599
Depreciation 2,946 2,636
Other operating charges 3,729 4,599
(39,511) (39,834)
Group operating profit 468 2,694
Share of operating profit of joint 24 0
venture
Operating profit including joint 492 2,694
venture
Profit on sale of fixed asset 743 0
investments
Net interest (206) (276)
Other finance income 553 1,028
Profit on ordinary activities before 1,582 3,446
taxation
Taxation on profit on ordinary (432) (528)
activities
Profit on ordinary activities after 1,150 2,918
taxation
Minority interest 0 (5)
Profit for the financial year 1,150 2,913
Dividends 0 (577)
Profit transferred to reserves 1,150 2,336
Earnings per share 9.8p 25.3p
Statement of total recognised gains and losses for the year ended 31st December
2002
2002 2001
Profit for the financial year 1,150 2,913
Actuarial loss recognised in the pension scheme
(11,427) (7,862)
Movement on deferred tax relating to pension liability
2,979 2,062
Current tax relating to pension liability 270 0
Total recognised losses for the year (7,028) (2,887)
Prior year adjustment (5,606)
Total losses recognised since last financial statements (12,634)
Consolidated balance sheet at 31st December 2002
2002 2001 (restated)
#000 #000 #000 #000
Fixed assets
Tangible assets 13,856 13,848
Investments 600 1,119
Investments in joint ventures:
share of gross assets 3,142 2,271
share of gross liabilities (2,385) (1,521)
757 750
15,213 15,717
Current assets
Stock and work in progress 8,720 6,979
Amounts recoverable on contracts 2,812 4,078
Debtors 12,567 12,258
Cash at bank and in hand 4,571 3,298
28,670 26,613
Creditors: amounts falling due (23,698) (23,039)
within one year
Net current assets 4,972 3,574
Total assets less current 20,185 19,291
liabilities
Creditors: amounts falling due
after more than one year (2,667) (1,889)
Provisions for liabilities and (191) 0
charges
(2,858) (1,889)
Net assets excluding pension 17,327 17,402
liability
Pension liability (12,559) (5,606)
Net assets including pension 4,768 11,796
liability
Capital and reserves
Called up share capital 1,293 1,293
Share premium 1,864 1,864
Capital redemption reserve 132 132
Profit and loss account 1,479 8,507
Shareholders' funds 4,768 11,796
Consolidated cashflow statement for the year ended 31st December 2002
2002 2001
#000 #000 #000 #000
Net cash inflow from operating 2,179 6,281
activities
Returns on investments and servicing of
finance
Interest received 130 151
Interest paid (191) (267)
Finance lease interest paid (130) (160)
Net cash outflow from returns on
Investments and servicing of finance (191) (276)
Taxation (326) (75)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (1,748) (1,439)
Sale of tangible fixed assets 1,650 1,733
Employee Share Ownership Plan
- purchase of shares (3) (2)
- disposal of shares 911 2
Net cash inflow/(outflow) from capital 810 294
expenditure and financial investment
Acquisitions and disposals
Purchase of shares in joint venture 0 (750)
Net cash outflow from acquisitions and 0 (750)
disposals
Equity dividends paid 0 (577)
Net cash inflow before financing 2,472 4,897
Financing
Bank loans 900 (494)
Capital element of finance lease (1,773) (1,538)
rentals
Net cash outflow from financing (873) (2,032)
Increase in cash 1,599 2,865
Notes:
1. Basis of preparation
The financial information in this preliminary announcement has been prepared in
accordance with the accounting policies set out in the financial statements of
Amco Corporation Plc for the year ended 31st December 2001, which have remained
unchanged for the financial year ended 31st December 2002, except for the
adoption of FRS 17 - Retirement Benefits.
2. Earnings per share
Earnings per ordinary share have been calculated on the basis of profit for the
period after tax, divided by the weighted average of ordinary shares in issue in
the year (excluding those held in the ESOP Trust) of 11,778,408. The
comparatives are calculated by reference to the weighted average of shares in
issue which was 11,531,658 for the year ended 31 December 2001.
3. Preliminary announcement
Copies of the preliminary announcement are available from the company's
registered office at Amco House, 25 Moorgate Road, Rotherham, South Yorkshire,
S60 2AD. The Annual Report and Accounts for the year ended 31st December 2002
will be posted to shareholders on or about 8th May 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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