RNS Number:5205S
AMCO Corporation PLC
6 March 2002
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED
31 DECEMBER 2001
AMCO CORPORATION PLC ("AMCO" OR "THE GROUP")
CHAIRMAN'S STATEMENT
Introduction
In 2001 the Amco Group continued to focus upon three main activities in
structural engineering, property development and contracting in the rail,
construction and mining industries. Through rationalisation and diversification
with further partnering arrangements and the development of new products, our
tunnelling and allied equipment manufacturing operations, which previously had
been seen as marginal activities, have been substantially improved and now form
an important part of the Group's future.
Our overseas activities have been substantially reduced with the pending closure
of the Konkola copper mine in Zambia. Remaining activities will be in onshore
diamond drilling for minerals - we have recently commenced a two year drilling
contract at the Siguiri Mine in Guinea for Ashanti Goldfields - and in mining
contracting, where we remain preferred bidder for the fifteen year contract for
the operation of the Sulcis Coal Mine in Sardinia. We expect the future of that
mine to be decided sometime in 2002.
Financial Summary
Turnover on continuing activities increased by 14% from £81 million in 2000 to
£92 million in 2001.
Operating profits increased substantially to £2.7 million in 2001. Profits
before tax were £2.4 million in 2001 compared with a loss before tax of £0.6
million in 2000. No exceptional provisions for industrial disease were required
in 2001 compared with £1.17 million in 2000.
Earnings per share were 16.4 pence as compared with negative earnings per share
of 0.9 pence in 2000.
Net debt at 31 December 2001 represented 12.3% of net assets (capital and
reserves). This compares with 33.5% at 31 December 2000.
Net assets at 31 December 2001 were £1.34 per share compared with a mid-market
share price of 70.5 pence as at the close of business on 5 March 2002.
Dividends
Our gearing at the year end was such that we were able to pay a interim dividend
of five pence per share on 31 December 2001. We are not recommending a final
dividend.
Operational Highlights
Structural Steel
Billington Structures completed several major contracts during 2001 including
town centre redevelopment schemes in Redcar and Redditch and 'The Light', the
landmark city centre leisure and retail project in Leeds. A major achievement
for the company in 2001 was winning the Contract Journal's 'Specialist
Contractor of the Year' award.
Property Development
During 2001 our retail park development at Heanor in Derbyshire was successfully
completed and a number of future development opportunities were identified.
Contracting
Donelon's tunnelling activities, which we acquired in 2000, were integrated into
Amalgamated Construction and the new division carried out contracts for the
National Grid, Scottish and Southern Energy and BT. The Engineering division was
awarded the Stanley Mills hydroelectric scheme in Scotland. The continuing
diversification in the Mining division included contracts in Spitzbergen,
Sardinia and for Cleveland Potash.
Tunnelling and allied equipment manufacture
Dosco made sales of mining equipment to Russia, Spain, USA and Malta and of
tunnelling equipment in the UK. A pipe conveyor installation was completed in
Hungary and Birtley Projects was awarded a major design and construct contract
for a materials handling installation at West Burton power station.
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 2001.
Outlook for 2002
We anticipate profitable trading in all our activities in 2002 and an
improvement in operating results compared with 2001. However I must warn that,
like many other Groups with final salary pension schemes, we have recently
become aware of significant deficiencies in our two final salary schemes
following the requirements of FRS 17 and the MFR. Both schemes are closed to new
entrants and, depending on stock market fluctuations, the 2002 results may be
adversely affected by requirements to fund deficits caused by short-term
fluctuations in pension fund asset values.
We are looking forward to the satisfactory development, in joint venture with
Tolent, of a 166,000 square feet office development South East of Leeds.
Stuart N. Gordon
Chairman
6 March 2002
CHIEF EXECUTIVE'S REVIEW
Overview
Our improved performance in 2001 is very satisfactory and is the result of
significant reorganisation and change throughout the Group over the last three
years. The focus of our future activities will be Contracting, Structural Steel
and Property Development supported by our Engineering and Manufacturing
activities.
In 2001 the consolidation of all contracting activities into Amalgamated
Construction was completed and the resultant business restructured to achieve
clear market orientation. Ambitious plans for growth and improved profitability
have now been set and we look forward to further penetration of the rail and
infrastructure markets with the range of specialist activities we are able to
provide from our skilled and experienced staff and workforce.
We will continue to make investment throughout the Group to expand the scope of
our services and products and improve the efficiency of our businesses whenever
we identify opportunities that will lead to further improvement in the return on
capital employed.
Health and Safety
Our mission is to reduce risks in the workplace to prevent accidents and ill
health.
The reduction of risks 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 Groups operations. In 2002 further initiatives will be
adopted to achieve our policy and commitment to continuous improvement in health
and safety management and to promote a health and safety culture and awareness
throughout our businesses.
Management Systems
Last year we commenced a process throughout the Group to review our management
systems and procedures. This process is now well advanced and we already have in
place within Amalgamated Construction an intranet based management system that
covers all aspects of the business process. Similar systems are now being
developed in other Group companies.
Advances in information technology are now taking a greater role in the
management of our business activities. Billington Structures have revolutionised
their business systems with the implementation of a knowledge management tool -
BILMIS. Using browser technology the system acts as a customer relationship
manager handling contacts, enquiries and sales leads right through to the order
and a window into all of Billington's existing software applications and
business knowledge delivering data and reports direct to everyone's desktop. The
final phase of the project, document management, will be rolled out during 2002.
The system will be an essential tool in the future to maintain efficiencies in
the face of our increasingly complex business processes.
The introduction of the electronic management system into Amalgamated
Construction facilitated the company's achievement of the revised Quality
Management Standard BS EN ISO 9001:2000 in November 2001. Other companies within
the Group are aiming to achieve this new standard during the forthcoming twelve
months.
Training and Development
We recognise that the training and development of all employees to maximise
their efficiency and potential to meet future business needs is fundamental to
the future growth and profitability of our business.
Further progress with our corporate training and development programme has been
made throughout 2001. Investment in training and development continues to
increase with the focus in 2002 being on health and safety training and
awareness, job skills training and management and professional development.
Both Amalgamated Construction and Billington Structures have programmes in place
to meet their commitment to the Construction Industry's national initiative to
achieve a fully qualified workforce by the end of 2003.
Environment
The Group continues to emphasise the need to control its environmental impacts
and specific programmes have seen significant reductions in energy usage and
waste generation at several of our operational bases. Our activities continue to
be recognised for their comprehensive control of their environmental aspects by
both clients and the regulators. In the coming year we will continue our
programmes of education and training to increase awareness of both our staff and
sub-contractors in order to achieve our goal of continuous environmental
improvement.
In recognition of its contribution to environmental performance Amalgamated
Construction was awarded the 2001 Annual Environmental Award by Railtrack.
Construction
Amalgamated Construction continued to maintain its targeted growth throughout
2001 in its core mining and civil engineering activities whilst incorporating
the specialist tunnelling activities of the Donelon business, the geotechnical
and exploratory drilling capabilities of Amco Drilling, the electrical,
mechanical and systems engineering skills of Amco Engineering and the minerals
consultancy business of Amco Robertson.
In 2001 our rail activities achieved a 70% growth with an increased scope in the
infrastructure maintenance and structural repair works undertaken for Railtrack
(LNER), supplemented by tunnel refurbishment and structural repair works for
Railtrack Great Western and Railtrack North West.
During the year Donelon relocated to new premises in Warrington and
progressively re-established its position in the market with tunnel
refurbishment contracts for National Grid, Scottish and Southern Energy and
British Telecom. Donelon has recently been awarded contracts for the
construction of three additional cross passage tunnels between the north and
south bores of the Mersey Kingsway Tunnel; the Dunfermline duplication sewer for
the East of Scotland Water Authority; and the Don Valley sewer in Aberdeen for
the North of Scotland Water Authority. We anticipate further significant growth
during 2002.
The engineering business extended its portfolio of sustainable energy related
experience with early participation in methane co-generation projects and the
award for 2002 construction of the Stanley Mills hydro-electric scheme at Perth
for Innogy plc. UK geotechnical services are being progressively extended beyond
ground stabilisation and grouting to include surface and underground site
investigation and exploratory drilling together with soil nailing and other
embankment stabilisation techniques.
Market conditions in the UK coal mining industry have remained difficult
throughout the year but turnover levels equivalent to those achieved in 2000
have been maintained in this traditional sector. Overall our mining activities
achieved turnover growth of 13% in 2001 by increased participation in the UK
minerals market and the completion of mining related projects at Spitsbergen in
Norway and at the Sulcis Coal Mine in Sardinia. Further selective participation
in the overseas mining sector is targeted in future years. Drill and blast
activities undertaken at Orgreave and Garleffan opencast coal sites performed
well in the year benefiting from revised working methods and plant selection.
Amco Engineering undertook term facilities maintenance contracts at Ratcliffe
for PowerGen and at Didcot 'A' and 'B' Power Stations for Innogy and at regional
sub-stations for the National Grid. Engineering services contracts were
successfully completed for Nottingham NHS Trust and South Yorkshire PTE and
telemetry and instrumentation contracts for the Environment Agency were able to
resume on the lifting of the foot and mouth restrictions in the North West.
Increased tender opportunities have progressively been accessed throughout the
year and the order book for 2002 is already in excess of 2001 turnover levels,
with repeat business for existing clients together with secured work in
partnership with Amco Rail at Durham Station and Tees Signal Box and on the
Stanley Mills hydro-electric project.
Our overseas exploratory drilling activities had an extremely disappointing year
exacerbated by the lack of secured work and a series of contract delays and
cancellations. Following a strategic review, overseas drilling is now
concentrated on the recently awarded two year term drilling contract at Siguiri
Mine, Guinea for Ashanti Goldfields.
Amco Robertson Mineral Services progressively increased its portfolio of
international assignments and provided technical services in all of the
fundamental mining disciplines from mineral exploration through to mine
engineering and minerals process engineering. Projects are currently being
pursued that will also provide potential opportunities for the mining and
exploratory drilling capabilities within Amalgamated Construction.
A strategic business review undertaken in 2001 resulted in the decision to
complete the integration of the businesses incorporated into Amalgamated
Construction during the last 18 months and restructure its operations into four
operating divisions, each to operate as distinct multi-disciplined client and
sector focused businesses. The restructuring was fully operational from the
beginning of 2002.
Amco Mining provides infrastructure services to the coal and other deep mine
mineral extraction industries in the UK and Europe; drill and blast services for
the open-cast mining and quarrying industries; exploration drilling services to
world mining and minerals industries; and mineral consultancy services to both
the UK and international minerals industries.
Infrastructure maintenance services to the UK rail industry will be provided
through Amco Rail specialising in the maintenance of structures and tunnels,
major projects, minor works contracting and general building and civil
engineering works
Underground civil engineering, tunnel drivage and tunnel refurbishment services
for the utilities, water and transportation industries are provided through Amco
Donelon.
Amco Engineering operates as a multi-disciplined business combining the
activities of civil engineering, electrical and mechanical engineering,
facilities and asset maintenance and geotechnical engineering.
Structural Steel
During 2001 Billington Structures concentrated on the consolidation of its
activities and the improvement of production efficiencies at its two factories
in Barnsley and Bristol. The company implemented a new marketing strategy to
emphasise a customer and client focussed approach and this resulted in preferred
supplier status being achieved with several major contractors including, Kier
Build, Shepherd, Balfour Beatty, Carillion, Sir Robert McAlpine and Tolent. Some
65% of its business is now generated from nine partnered clients and this is
planned to increase in 2002.
The company operates on a national basis and across the full spectrum of
structural steelwork contracting. 2002 started with on site work at
Castlepoint, the large out of town development near Bournemouth, which at £5
million is the company's largest single contract award to date. It is also
working on a whole host of projects located across the country from Glasgow to
Devon and following on from the successful completion of a project for Ikea in
Doncaster, a further distribution centre for this client in Peterborough is also
now in the order book. Among several major contracts of interest undertaken
during 2001 were town centre redevelopment schemes in Redcar and Redditch and '
The Light', a landmark city centre leisure and retail project in Leeds.
A major achievement for the company in 2001 was winning Contract Journal's '
Specialist Contractor of the Year' award.
Hollybank Engineering continues to specialise in the design and manufacture of
structural steel underground roadway supports, junction structures and
ancillaries for the mining and civil engineering industries. Improvements to the
production process continue to improve factory performance and efficiencies and
provide a safe working environment. However, the business continues to be
affected by the reducing demand from the UK coal industry.
Property Development
Our property development activities are now becoming well established within
Amco Developments. During 2001 the retail park development at Heanor in
Derbyshire was successfully completed and the end investment sold on. Work is
expected to commence in early March on a 166,000 square feet business park
development at Swillington, Leeds adjacent to Junction 46 of the M1.
We have also achieved preferred developer status on three projects: a 150,000
square feet leisure scheme in Grimsby anchored by a national cinema operator; a
mixed use scheme in Newcastle-upon-Tyne comprising leisure, residential and
offices; and a retail park in Stockton-on-Tees. Numerous other opportunities are
currently at varying stages in the development cycle.
At the beginning of 2002 a joint venture company was formed with the Strata
Group, initially to undertake a 90,000 square feet office development in
Sheffield.
Engineering
Dosco maintained a very satisfying growth in sales and future opportunities in
2001, achieving a 40% increase in turnover on the previous year.
The partnering initiative which commenced with an agreement with UK Coal for the
repair and overhaul of roadheaders and other mining equipment has been extended
to civil tunnelling customers and the company hopes to build on this approach in
other areas of the business.
An increase in sales opportunities in Canada and the US has been achieved
through investment in intensified sales and marketing activities. The company's
first sale to Russia was achieved in 2001 and although satisfactory financial
security will inevitably restrict the volume of future sales opportunities, this
country has great potential for future roadheader machine sales. The business
also re-entered the Spanish coal mining market with the sale of a roadheader to
the Hullas Del Coto mine in northern Spain.
The newly established Birtley Projects business secured its first major contract
for the design and construction of a materials handling installation in
connection with the construction of a new FGD plant at West Burton power
station.
The company re-entered the crusher market in 2001 with a range of crushers and
sizers particularly focussed on the mineral processing industry where its first
machines have already been delivered and are in operation.
New product developments for the future include a new range of high powered
cutter booms especially designed for evaporate mines, the further development
and launch of their 'Multidrill' equipment for the micro-tunnelling industry and
a range of shredding equipment for the re-cycling industry.
Manufacturing
Amco Plastics continues to expand its thermoplastic extrusion capabilities and
during 2001 substantial investment was made in the business with the
construction of a 6,000 square feet extrusion unit and the conversion of 5,000
square feet of existing premises into a high density storage facility.
Investment was also made in additional extrusion machinery and the continuing
automation of downstream functions. During 2002 the business focus will be on
product development to further diversify the extrusion activities and continue
the move into higher value added products.
Other activities in the business continue to include the manufacture of flexible
ventilation ducting and strata control products for the civil tunnelling and
mining industries and for an increasing selection of industrial uses.
Overseas
Our contracting activities in Zambia, in joint venture with Shaft Sinkers (Pty),
are threatened by the potential closure of the Konkola Copper Mine.
Our mineral consultancy activities continue under the banner of Amco Robertson
with commissions undertaken in 2001 in Europe, South America, Africa and Asia.
We also continue to undertake exploration drilling work overseas and have
recently commenced the 24 month drilling programme at the Siguiri Mine in
Guinea.
Amalgamated Construction remains preferred bidder for the operation and
maintenance of the Sulcis Coal Mine in Sardinia and we anticipate that the
contract will now be in place mid 2002.
O. H. Schmill
Group Chief Executive
6 March 2002
FINANCIAL DIRECTOR'S REPORT
Results
Turnover on continuing activities in the year ended 31 December 2001 increased
by 14.1% to £92.2m from £80.8m in the previous year. A large proportion of the
increase occurred in Amalgamated Construction which continued to expand into new
markets following the ongoing reduction in it's traditional coal mining market.
Property development generated £4.5m of turnover in the year following the
establishment of this activity in late 1999. Turnover in the structural steel
companies reduced marginally during the year although activity in the Dosco
workshops increased for the second consecutive year.
The Group reported an operating profit for 2001 of £2.7m, a considerable
improvement on both the normal operating profit of £1.0m and the total operating
loss of £0.3m in 2000. The operating profit margin on normal continuing
operations increased in the year from 1.3% to 2.9%. The result for 2001 did not
suffer from the necessity to provide exceptional provisions against the
industrial disease vibration white finger that blighted the year 2000 figures.
All of the Group's trading activities were profitable during the year with the
exception of a modest loss in Amco Plastics.
Net interest payable in the year remained at £0.3m and the profit before tax of
£2.4m in 2001 compares favourably with a loss of £0.6m in 2000.
Taxation
The tax charge of £0.5m in the year equates to an effective corporation tax rate
of 21.8% with the charge having been reduced by the utilisation of previously
written off advance corporation tax and trading losses brought forward in
subsidiary undertakings.
Earnings and dividends per share
Earnings per share were 16.4p in 2001 compared to a loss per share of 0.9p in
2000. An interim dividend of 5.0p per share was declared and paid during the
year which was over three times covered.
Capital expenditure
The Group continued to invest in capital equipment with a further £3.0m (2000 -
£3.7m) of capital expenditure in the year of which £1.5m (2000 - £1.7m) related
to replacements in the Group's motor vehicle fleet. Of the balance of £1.5m,
£0.9m was in respect of civil engineering equipment, £0.2m related to a property
extension and the balance was invested in plant and equipment throughout the
Group. The depreciation charge for the year was £2.6m and total fixed assets in
the Group reduced from £15.0m to £13.8m during 2001 as a result of £1.3m of
property disposals.
Cashflow
The Group had net debt at the end of 2001 of £2.1m, an inflow of funds of £3.3m
from the net debt position of £5.4m at the end of 2000. Bank overdrafts have
reduced by £2.0m to £1.9m and cash at bank has increased by £0.8m to £3.3m. Bank
loans have reduced by £0.5m and the inception of £1.6m of new finance leases
exceeds by £0.1m the £1.5m repayment of finance leases. The gearing of the Group
at the end of 2001 was 12.3% (2000 - 33.5%), calculated on net debt of £2.1m and
net assets of £17.4m.
Ian Swire
Group Financial Director
6 March 2002
Profit and loss account for the year ended 31st December 2001
2001 2000
£000 £000 £000 £000
Turnover
Continuing operations 92,173 80,792
Discontinued operations 0 464
92,173 81,256
Decrease in work in progress (974) (166)
91,199 81,090
Raw materials and consumables 34,891 34,743
Other external charges 13,780 10,153
(48,671) (44,896)
42,528 36,194
Staff costs 32,599 28,942
Depreciation 2,636 3,049
Other operating charges 4,599 4,512
(39,834) (36,503)
Operating profit/(loss)
Continuing operations - normal 2,694 1,044
Continuing operations - exceptional 0 (1,172)
2,694 (128)
Discontinued operations 0 (181)
2,694 (309)
Net interest (276) (290)
Profit/(loss) on ordinary activities before 2,418 (599)
taxation
Taxation on profit/(loss) on ordinary (528) 500
activities
Profit/(loss) on ordinary activities after 1,890 (99)
taxation
Minority interest (5) 31
Profit/(loss) for financial year 1,885 (68)
Dividends (577) 0
Profit/(loss) transferred to reserves 1,308 (68)
Earnings/(loss) per share 16.4p (0.9)p
Consolidated balance sheet at 31st December 2001
2001 2000
£000 £000 £000 £000
Fixed assets
Tangible assets 13,848 15,023
Investments 1,869 1,119
15,717 16,142
Current assets
Stock and work in progress 6,979 7,891
Amounts recoverable on 4,078 2,903
contracts
Debtors 12,258 11,957
Cash at bank and in hand 3,298 2,468
26,613 25,219
Creditors: amounts falling due (23,039) (23,114)
within one year
Net current assets 3,574 2,105
Total assets less current liabilities 19,291 18,247
Creditors: amounts falling due (1,889) (2,153)
after more than one year
17,402 16,094
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 14,113 12,805
Shareholders' funds 17,402 16,094
Consolidated cashflow statement for the year ended 31st December 2001
2001 2000
£000 £000 £000 £000
Net cash inflow from operating activities 6,281 2,776
Returns on investments and servicing of finance
Interest received 151 200
Interest paid (267) (309)
Finance lease interest paid (160) (181)
Net cash outflow from returns (276) (290)
on investments and servicing of
finance
Taxation (75) 127
Capital expenditure and financial investment
Purchase of tangible fixed (1,439) (1,996)
assets
Sale of tangible fixed assets 1,733 592
Employee Share Ownership Plan
- purchase of shares (2) (34)
- disposal of shares 2 9
Net cash inflow/(outflow) from 294 (1,429)
capital expenditure and
financial investment
Acquisitions and disposals
Purchase of shares in joint (750)
venture
Net cash outflow from (750)
acquisitions
and disposals
Equity dividends paid (577) 0
Net cash inflow before financing 4,897 1,184
Financing
Bank loans (494) 567
Capital element of finance (1,538) (1,240)
lease rentals
Net cash outflow from financing (2,032) (673)
Increase in cash 2,865 511
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 31 December 2000, which have remained
unchanged for the financial year ended 31 December 2001.
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 11,531,658. The
comparatives are calculated by reference to the weighted average of shares in
issue which was 11,526,185 for the year ended 31 December 2000.
3. 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 31
December 2001 will be posted to shareholders on or about 1 May 2002.
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