RNS Number:9453X
AMCO Corporation PLC
23 April 2004
AMCO CORPORATION PLC ("AMCO" OR "THE GROUP")
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2003
CHAIRMAN'S STATEMENT
Introduction
I regret to announce significant trading losses for 2003 of #4.4 million before
tax, #3.1 million after tax. However there were substantial surpluses on
revaluation of properties of #3.3 million and on gains recognised in the pension
schemes of #3.2 million before tax and #2.3 million after tax. There were
therefore net recognised gains for the year of #2.5 million taken to increase
shareholders' funds in the Balance Sheet.
The contract, to which reference was made in the statement of 27th November
2003, is not yet complete. We have written off all costs to 31st December 2003
and charged a provision for future irrecoverable costs in 2004. The total
write-off and provision in the 2003 financial statements was #2.6 million.
Further, after detailed investigation we have had to write off an additional
#1.5 million in 2003 in Amalgamated Construction Company Limited against other
contracts and assets. A restructuring of management and operations of that
subsidiary has taken place to provide a viable future.
Although Dosco had a substantial workload in the second half of 2003, they
incurred losses on a civil tunnelling machine supply and commissioning. A
Commercial Director was appointed in November 2003 and he was made Chief
Executive in February 2004.
Property development and structural steel activities were profitable in 2003.
Dividends
There will be no dividends for 2003.
Liquidity and capital resources
Gearing at 31st December 2003 was 19% compared with 12% at 31st December 2002.
Prospects
We are pursuing claims on three major civil engineering contracts in Scotland,
one of which is in the adjudication process. These claims will not be recognised
in the financial statements until settled.
The fixed price term rail contract was renegotiated in March 2004 and additional
employer's liability insurance costs on that activity are now being recovered.
The Group traded at a small profit for the first three months of 2004 and we
anticipate profitable trading for the remainder of the year.
Management and workforce
I should like to thank all employees for their efforts in this very difficult
year.
S. N. Gordon
Chairman
23rd April 2004
OPERATIONAL REVIEW
The Group's focus on the development of its property development, structural
steel and construction activities continues, supported by its interests in
tunnelling equipment manufacture.
Henry Schmill, the founder of the Amco group in 1970, died in September 2003. He
is greatly missed by not only his friends and colleagues but throughout the UK
coal mining industry.
The results in 2003 were adversely affected by taking losses and provisions on a
number of difficult contracts in Amalgamated Construction and Dosco Overseas
Engineering. Senior management changes have taken place in both of these
companies to provide for a viable future. The financial implications of these
contracts led to the adverse figures for the whole Group.
We plan to avoid these types of construction contract in future and concentrate
on our proven specialist construction activities. This should ensure that,
together with the completion of property development projects currently in hand,
the Group should achieve a much improved performance in 2004.
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 2004 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
2003 saw further 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 operate process based
business management systems delivered electronically using web browser
technology.
Companies within the Group have all successfully maintained ISO 9000 (Quality)
and ISO 14000 (Environmental) certification of their management systems during
2003.
Training and Development
Substantial investment in employee training and development to meet the needs of
the future business has been made in 2003 and will continue throughout 2004.
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 2003 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. The manager and supervisor qualification programmes
were completed during 2003 and focus was then placed on the registration and
qualification of the 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
At the end of 2003 Amalgamated Construction restructured its activities into two
multi-disciplined client focused operating divisions: Capital Projects and
Infrastructure Services.
Capital Projects
The Capital Projects division now includes Amco Donelon and Birtley Projects.
Amco Donelon, the specialist tunnelling division, further consolidated its
market position and achieved further growth in turnover in 2003. Major projects
activity in the year included the commencement of the #5.8 million Severn-Wye
Cable Tunnel Refurbishment contract. Adverse ground conditions continued to
affect progress and financial recovery on the Dunfermline Duplication Sewer
contract and these problems are still to be resolved. The recent award of the
#6.8m Mersey Queensway Tunnel contract has boosted the order book and provides
confidence that Donelon will achieve their planned growth during 2004.
Birtley Projects completed a major materials handling installation at West
Burton power station associated with the construction of its new FGD plant and
undertook the design and construction of a new jetty improvement project at
Tilbury Power Station with the Birtley scope encompassing a new conveyor and new
oil unloading arms together with the upgrade of two continuous ship unloaders.
Infrastructure Services
The Infrastructure Services division now includes Amco Rail, Amco Mining and
Amco Engineering. A new business, Amco Coatings, has recently been established
in the division to undertake the maintenance and refurbishment of steel
structures.
Amco Rail has recently renegotiated a further two year extension to its Minor
Works contract for Network Rail Eastern and has recently commenced work on a #7
million contract of specialist works in connection with the Strood and Higham
Tunnel Relining project for Network Rail Southern.
Amco Mining is currently undertaking a #3.7m contract for remedial works to the
Woodhead Cable Tunnel running beneath the Pennines for National Grid.
In 2003 Amco Engineering was awarded a 5 year #20 million EC&I term maintenance
contract for the Magnox Power Stations by UKAE, and this adds to its growing
portfolio of asset maintenance work being undertaken for National Grid,
PowerGen, the Environment Agency and the Oil and Pipelines Agency.
Amco Mining Services
Amco Mining Services was established in 2003 to service the requirements of UK
Coal plc. The continued reduction in the UK coal mining industry has caused
problems for both mine owners and mining contractors in recent years and in
order to continue to provide this essential service for the UK mining industry,
it was essential that a guaranteed level of work was available. This was
recognised by UK Coal plc and a new partnership was established between the two
companies and the new company was created to ensure transparency.
Structural Steel
Billington Structures, despite enjoying a record year for turnover in 2003, was
not able to return acceptable margins on much of this work. This was not
uncommon in the structural steel industry during a year which saw a number of
competitors driving down market price at the expense of margin and even, in the
case of a well publicised competitor, receivership. Billington benefited from
its emphasis on building long term, mutually beneficial relationships with a
limited number of major clients and contractors but was not immune from the
margin squeeze. With 2,270 tonnes of complex structural steelwork to erect, the
Sage project in Newcastle was a landmark contract for Billington that was
completed on time and to budget. The company also produced the second LIGHT
building for the Leeds Institute for Genetics Health and Therapeutics.
Billington supplied the structural steelwork, decking and stairs including a
selection of secondary steelwork for link bridges, flue supports and plant
rooms.
During 2003, Billington was adjudged Building Magazine's Specialist Contractor
of the Year.
During the year Billington acquired the business of Tubecon, which allowed the
company the flexibility to supply tubular structures of increasingly
architectural complexity and finesse. Auditoriums, atriums and pyramids are just
a few of the recent tubular projects executed by Tubecon.
Manufacturing of HB Safety Barrier systems continued at a pace as a flood of
enquiries were received for easi-edge, the latest development in edge protection
systems for the construction and engineering industries. Bolting to a steel
frame with a simple fixing, the easi-edge barrier system has the capacity to
support safety-netting systems attached from below. Simple to install, the
rugged but lightweight system offers full height handrail protection. A meshed
screen with kick plates to the base and netting support features ensures optimum
performance for all types of elevated safety applications.
The company continued its programme of improvements to its production facilities
with the installation of further new CNC machines at its Wombwell and Yate
factories.
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 2003, 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 2004.
Planning approval was secured in the year for the 90,000 sq ft St Mary's Gate
office development in Sheffield where interest in the scheme remains
encouraging. However, a start on site will not be made until a pre-let has been
secured.
Having secured planning approval in 2002, work has now started on 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 it is envisaged that the business park will be built out over the
next few years.
Work on a retail project in Hull commenced at the beginning of 2004 and a number
of other opportunities are currently in varying stages in the development cycle
including mixed use schemes in Newcastle and Sheffield.
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
engineering tunnelling market, 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.
"Bea" is the recently supplied boom in-shield tunnelling machine and is being
used to excavate the multi-million pound Piccadilly Line rail network extension.
Designed and built at Dosco's Tuxford site "Bea" is 4.8m in diameter, has an
overall length of over 50m and weighs 60 tonnes. She was supplied to tunnelling
contractor Morgan Vinci which is carrying out the tunnelling project for BAA.
The work involves boring a 1.6km long tunnel in both eastbound and westbound
directions. The work is scheduled to be completed by December 2004.
A Dosco designed and manufactured 6.84m diameter back-hoe in shield machine is
being used under London on "Contract 103" of the Channel Tunnel Rail Link ("CTRL
") project. Dosco supplied the machine to Kier Nuttall Joint Venture who are
excavating the tunnel for Rail Link Engineering, the project managers and
designers of the CTRL.
In Iran, Dosco successfully delivered four new roadheaders for the Tabas coal
mine, and the company is optimistic that further machine sales will be made into
Iran and Russia during 2004.
Manufacturing
During 2003 Amco Plastics continued 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 were fostered to
promote supply partnerships as a platform for stable growth. The company now has
the capacity to extrude and laminate polymer profiles to customers' precise
specifications and can also laminate a wide range of materials, including
recycled polymers, aluminium, wood, glass fibre composites and MDF.
FINANCIAL DIRECTOR'S REPORT
Results
Group turnover in the year ended 31st December 2003 increased by 16.2% to
#105.3m from #90.6m in the previous year. Almost #11m of this increase related
to construction activities within Amalgamated Construction with Billington
Structures and Dosco Overseas Engineering also reporting increased turnover.
The Group reported a group operating loss for 2003 of #4.0m, a considerable
reduction from the operating profit figure of #0.5m in 2002. A number of factors
adversely affected the result in 2003, particularly in Amalgamated Construction,
which reported losses on one contract, including estimated costs to complete, of
#2.6m. There are claims to be recovered but it is Group policy not to take any
potential claims by the Group into the financial statements until they have been
agreed. The Group generated profits of #0.5m from its share of the operating
profits from the Amco Strata joint venture.
The decision of the Group to fully implement FRS 17 Retirement Benefits in the
2002 financial statements has led to the inclusion of a finance cost figure on
the 2003 consolidated profit and loss account of #0.3m compared to an income
figure of #0.6m in 2002. This cost is the difference between the expected return
on the pension scheme assets (#2.2m) and the interest on the pension scheme
liabilities (#2.5m) in the year.
Taxation
The tax credit of #1.4m in the year equates to an effective corporation tax
credit rate of 30.7% on the Group's losses.
Loss and dividends per share
Loss per share was 26.0p in 2003 compared to an earnings per share of 9.8p in
2002. No dividend has been declared or will be paid for the year.
Capital expenditure
The Group continued to invest in capital equipment with a further #3.5m (2002 -
#4.1m) of capital expenditure in the year of which #1.6m (2002 - #1.8m) related
to replacements in the Group's motor vehicle fleet. Of the balance of #1.9m,
#0.8m was in respect of new machinery in Billington Structures with the rest
invested in plant and equipment throughout the Group. The depreciation charge
for the year was #3.2m and total fixed assets in the Group increased to #16.2m
as a result of a revaluation of the Group's properties which yielded a #3.3m
revaluation surplus.
Cashflow
The Group had net debt at the end of 2003 of #3.3m, an increase of #1.2m from
the net debt position of #2.1m at the end of 2002. Bank overdrafts have
increased by #1.2m to #2.7m and cash at bank has decreased by #0.8m to #3.7m,
leaving a net cash at bank figure of #1.0m at the end of 2003. Bank loans have
reduced by #0.4m and the repayment of #2.2m of finance leases exceeds by #0.3m
the inception of #1.9m of new leases. The gearing of the Group at the end of
2003 was 19.5% (2002 - 11.9%), calculated on net debt of #3.3m and net assets
excluding the pension liability of #16.9m.
I. Swire
Group Financial Director
23rd April 2004
Profit and loss account for the year ended 31st December 2003
2003 2002
#000 #000 #000 #000
Turnover including share of joint venture 104,084 89,858
Increase in work in progress 2,170 1,627
106,254 91,485
Share of turnover of joint venture (912) (849)
Group turnover 105,342 90,636
Raw materials and consumables 41,436 33,918
Other external charges 26,528 16,739
(67,964) (50,657)
37,378 39,979
Staff costs 34,785 32,836
Depreciation 3,196 2,946
Other operating charges 3,946 3,729
(41,927) (39,511)
Operating (loss)/profit excluding joint
venture
(4,549) 468
Share of operating profit of joint venture 521 24
Group operating (loss)/profit (4,028) 492
Profit on sale of fixed assets 108 743
Net interest (177) (206)
Other finance (cost)/income (332) 553
(Loss)/profit on ordinary activities before
taxation
(4,429) 1,582
Tax on (loss)/profit on ordinary activities 1,360 (432)
(Loss)/profit transferred (from)/ to reserves (3,069) 1,150
(Loss)/earnings per share (26.0)p 9.8p
Statement of total recognised gains and losses for the year ended 31st December
2003
2003 2002
(Loss)/profit for the financial year (3,069) 1,150
Unrealised surplus on revaluation of
properties 3,284 0
Actuarial gain/(loss) recognised in the
pension scheme 3,227 (11,427)
Movement on deferred tax relating to pension
liability (1,236) 2,979
Current tax relating to pension liability 291 270
Total recognised gains/(losses) for the year 2,497 (7,028)
Consolidated balance sheet at 31st December 2003
2003 2002
#000 #000 #000 #000
Fixed assets
Tangible assets 16,216 13,856
Investments 581 600
Investments in joint ventures:
share of gross assets 4,325 3,142
share of gross liabilities (3,211) (2,385)
1,114 757
17,911 15,213
Current assets
Stock and work in progress 10,876 8,720
Amounts recoverable on contracts 5,034 2,812
Debtors 12,139 12,567
Cash at bank and in hand 3,748 4,571
31,797 28,670
Creditors: amounts falling due (30,600) (23,698)
within one year
Net current assets 1,197 4,972
Total assets less current liabilities 19,108 20,185
Creditors: amounts falling due
after more than one year (2,169) (2,667)
Provisions for liabilities and charges 0 (191)
(2,169) (2,858)
Net assets excluding pension liability 16,939 17,327
Pension liability (9,674) (12,559)
Net assets including pension liability 7,265 4,768
Capital and reserves
Called up share capital 1,293 1,293
Share premium 1,864 1,864
Capital redemption reserve 132 132
Property revaluation reserve 3,284 0
Profit and loss account 692 1,479
Shareholders' funds 7,265 4,768
Consolidated cashflow statement for the year ended 31st December 2003
2003 2002
#000 #000 #000 #000
Net cash inflow from operating activities 580 2,179
Returns on investments and servicing of finance
Interest received 162 130
Interest paid (195) (191)
Finance lease interest paid (132) (130)
Net cash outflow from returns on
Investments and servicing of finance (165) (191)
Taxation 143 (326)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,605) (1,748)
Sale of tangible fixed assets 1,659 1,650
Employee Share Ownership Plan
- purchase of shares (3) (3)
- disposal of shares 22 911
Net cash inflow from capital expenditure and 73 810
financial investment
Net cash inflow before financing 631 2,472
Financing
Bank loans (376) 900
Capital element of finance lease rentals (2,232) (1,773)
Net cash outflow from financing (2,608) (873)
(Decrease)/increase in cash (1,977) 1,599
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 2002, which have remained
unchanged for the financial year ended 31st December 2003, except for the
revaluation of properties.
2. (Loss)/earnings per share
(Loss)/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 11,816,458. The
comparatives are calculated by reference to the weighted average of shares in
issue which was 11, 778,408 for the year ended 31 December 2002.
3. Preliminary announcement
Copies of the preliminary announcement are available from the company's
registered office at Amco House, Cedar Court Office Park, Denby Dale Road,
Wakefield, WF43QZ. The Annual Report and Accounts for the year ended 31st
December 2003 will be posted to shareholders on or about 7th May 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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