Final Results - Year Ended 31 December 1999

AMCO Corporation PLC 13 March 2000 CHAIRMAN'S STATEMENT INTRODUCTION The significant event of the year was the demerger and separate listing on the Alternative Investment Market of the Tolent building contracting companies. The re-positioning of the residual Amco Group continued during the year with a further reduction of 21% in coal mining related turnover (1998 35% reduction). Turnover in Dosco tunnelling and material handling equipment was 50% lower. However further progress was made in the expansion of the specialist civil engineering activities and a property development division has been set up with an experienced team who have a proven record in the industry. Further consolidation took place in the profitable structural steel activities. Adverse trading conditions continued in the drilling and ground engineering activities and in Zambia where the privatisation of the copper industry was further delayed. FINANCIAL SUMMARY The loss per share for the year was 11 pence compared with earnings per share of 8 pence for 1998. There are a number of non-recurring items involved in the calculation of the above figure and shareholders should carefully read the profit and loss statement. Net debt at 31 December 1999 represented 30.4% of net assets (capital and reserves). This compares with a figure of 24.5% at 31st December 1998. Net assets at 31st December 1999 were £1.25 per share compared with a share price on 10th March 2000 of £0.58 per share (31st December 1998 net assets of £1.23 compared with a share price of £0.95 on 18 March 1999). DIVIDEND A dividend of 28 pence per share was distributed in specie for all shareholders (other than Canadian and US shareholders who received cash) on 31st August 1999. Having regard to the results for the year a final dividend is not recommended. OPERATIONAL HIGHLIGHTS Amalgamated Construction continued to expand their operations in specialist civil engineering activities with the award of the Standedge Tunnel refurbishment contract for British Waterways and the Birches Head Sewer contract in Stoke. Our activities for Railtrack continued to expand. The merger of our structural steelwork activities into Billington Modern Structures and the further investment in this business increases our manufacturing capacity and allows us to undertake larger contracts and take advantage of market opportunities. Notable contracts in hand are at Meadowhall Shopping Centre and the Magna project in Rotherham EMPLOYEES On behalf of the Board of Directors I would like to thank our Subsidiary Company Directors and all group employees for their efforts in 1999. OUTLOOK FOR 2000 We are in the process of restructuring operations into four divisions - construction, structural steelwork, property development and overseas. This will achieve operational economies, strengthen our senior management teams and provide a new market focus. Declining activities will be strictly controlled or terminated as appropriate to avoid losses. Ongoing profitable activities will be streamlined and expanded. Overall we expect to return to profitability in 2000. Stuart N. Gordon Chairman 10 March 2000 ANNUAL REPORT & ACCOUNTS 1999 CHIEF EXECUTIVE'S REVIEW INTRODUCTION The Amco Group of companies provides a range of construction, engineering, property development, manufacturing and consultancy services in UK and overseas markets. Its core activities focus on the industrial, construction, power, transport, and mining sectors providing specialist niche services, delivering quality and value for money solutions to support the business activities of an increasingly diverse customer base. Our reputation with customers for innovation, engineering skills, and the successful completion of logistically challenging contracts is high and through an ongoing programme of training and development and a policy of continuous improvement we intend to maintain and improve this record into the future. 1999 was a difficult trading period for the Group with its traditional activities again suffering a further down turn in profitable business opportunities. In contrast our steelwork business had another successful year and investment was made in our property development business which now has a number projects in various stages of development and should provide a satisfactory profit stream for the Group within the next two years. I am pleased that Amco has shown its strength and capability over the last year by investing in new markets and business opportunities in the UK and overseas, the further development of which will underpin future growth and success for the Group. During 1999 the Tolent construction activities were de-merged from the Amco Group and in 2000 to secure the future development and profitable growth of Amco we will consolidate the remaining activities within a new divisional structure under Construction, Structural Steelwork, Property Development and Overseas activities. This will achieve operational economies, strengthen our senior management teams, and provide a new market focus, broadening both our geographical resources and technical services to respond to the needs of our expanding customer base and market opportunities. The ongoing programme of continuous improvement in Health and Safety management continues in all subsidiaries with the emphasis on providing and maintaining a safe place of work and providing appropriate training for both our operatives and staff. The group continues to meet its Environmental obligations and our increased environmental awareness ensures that such issues remain high on the corporate agenda with our main focus remaining on legislative compliance and continuous environmental improvement. I am pleased to report that Amalgamated Construction, Hollybank Engineering and Amco Plastics have all achieved BS EN ISO 14001 certification for their Environmental Management System during the preceding twelve months and that the majority of the group companies will complete their Environmental Management Systems during 2000. Our ongoing investment in Training and Development remains focused on statutory training and staff development and over the next year particular emphasis will be given to senior management and succession training. The group's in-house computer training resources have been well utilised during 1999 with a substantial number of individual training days being delivered, a similar level of utilisation is envisaged during 2000. Preparations are being made in readiness for the introduction of the new Quality Management standard BS EN ISO 9000:2000 which is due for publication later this year. Each quality assured group subsidiary will be affected by these changes and systems will need to be updated in order to comply fully with the revised requirements of this standard. The issue of this revised standard and its attendant changes is seen as an opportunity for the group to take a step forward and commence the development of fully integrated management systems incorporating all business activities. Amalgamated Construction has continued to achieve profitable growth in its specialist civil engineering activities during 1999 but this success has been off set by ongoing difficulties in the UK coal mining industry where our continuing contracting operations once again affected the results achieved. Throughout the year the Civil Engineering Division has added to its portfolio of successful tunnel and shaft refurbishment contracts with significant works undertaken for Railtrack, British Waterways and National Grid. Our contract for the refurbishment and re-opening to navigation of the Standedge Tunnel commenced at the end of May and is part of the £30 million Huddersfield Canal restoration programme which is supported by the Millennium Commission and English Partnerships with British Waterways responsible for the canal works. Work commences in 2000 on the Birches Head Combined Sewer Storage scheme for the City of Stoke-on-Trent. The works include the construction, through coal measures, of a 2.1 metre diameter tunnel, 1100 metre long, which will be driven by a Dosco boom header tunnelling machine. Within the scope of our Railtrack minor works contract we are also carrying out refurbishment work to the adjacent Standedge rail tunnels which date from 1849 and in future could form a part of the proposed Trans-Pennine freight route. Throughout 1999 the division has widened the range of activities undertaken for Railtrack to include bridge works, culverts and the civil engineering aspects of their station regeneration programme. Good progress has been made with securing work in the power and water industries and these markets will feature more strongly in the year ahead. The Mining Division has been restructured during 1999 and continues to seek wider opportunities in UK and overseas mining markets to supplement the declining work load available from the UK coal mining industry. The division has been successful in securing non-coal mining work in the UK in 1999 and will undertake a second major shaft refurbishment contract for Cleveland Potash during 2000. Overseas mining opportunities will become available in 2000. Amco Engineering has continued to diversify its activities and expand its client base throughout 1999, primarily within the facilities management and specialist contracting and maintenance sectors. The Power and Control division continues to prosper with blue chip clients including PowerGen, the Environment Agency and National Power all placing long term maintenance contracts during the past 12 months. The Building Services division has established itself in the specialist high voltage installation market utilising core skills inherited from its past activities. The Systems division continues to develop and further investment has been committed in the past year but disappointingly a number of current and prospective contracts have been delayed during the year. This business sector, although still embryonic, has great potential and we will therefore continue to position ourselves so we can realise the maximum benefits as this specialist industry develops. Amco Drilling (International) was formed at the start of the year from the merger of Amco Ground Engineering and Amco Orebit and now provides a range of drilling and ground engineering services in the UK and exploration drilling overseas. Both markets proved particularly difficult in 1999 with a significant reduction in expected overseas exploration opportunities resulting from the downturn in world metal prices. Overseas opportunities are now improving and it is hoped that a return to profitable operations will be achieved in 2000. Amco Robertson Mineral Services provides wide ranging technical and consultancy services to the mining industry, banks, financial institutions, governments and multi-lateral development agencies. These services include core geological, mine and mineral process engineering, and environmental expertise, supported by in-house mineralogical and metallurgical laboratories. Our personnel are skilled in the identification, exploration, evaluation and feasibility assessment of new and existing mining projects on a worldwide basis. The company is currently undertaking a major feasibility and pre-development engineering study of an open pit gold project in Tajikistan, in Central Asia and future opportunities include commissions in Venezuela, Egypt and the Middle East. During 1999 the Group increased its holding in Prosec Amco, a mining contracting business operating in Zambia. Further delays in the privatisation of the Zambian copper mines reduced the potential of this business throughout the year but the impending conclusion of this process should provide the company with greater opportunity in 2000. Dosco Overseas Engineering continue to diversify their activities building on their core multi-discipline engineering and design strengths to provide 'engineering solutions' for specialist equipment in the areas of tunnelling, mining, manufacturing and materials handling for customers in the UK and overseas. A new bulk materials handling division has been established specialising in the design and project management of major turnkey projects in the process, power and extractive industries and the pipe conveyor business is continuing to penetrate new markets and has recently been successful in winning contracts in the Czech Republic, Slovakia and Hungary and is currently pursuing opportunities in the Far East. Dosco designed and built the tunnelling machine to be used by Amalgamated Construction on their Birches Head sewer contract in Stoke on Trent and further civil tunnelling opportunities are now emerging from Europe with recent enquiries from Switzerland and Turkey. Billington Modern Structures was formed during 1999 from the merger of Billington Structures and Modern Engineering. The combined business now operates on two sites, Barnsley and Yate, near Bristol, with production throughputs in excess of 350 tonnes per week. The merger enables larger contracts to be undertaken and a more varied workload to be manufactured. Investment continues at the Yate factory, where a major refurbishment programme is nearing completion. The company continues to operate across the full spectrum of structural steelwork contracting, but has developed particular expertise in leisure and complex city centre refurbishment projects. 2000 starts with the completion of a 1000 tonne extension to the Meadowhall shopping centre in Sheffield and the award of a 700 tonne multiplex cinema in Lancaster together with a 1000 tonne leisure complex in Southport. Work has also started on a £1million contract for the Magna project in Rotherham. This new visitor attraction is being created at the redundant Templeborough steel mill, chronicling the history and manufacture of steel. Hollybank Engineering continues to be the UK's premier manufacturer of underground steelwork for the mining industry. The company now operates under the same senior management team as Billington Modern Structures. The property development activities of the Amco Group are now consolidated in Amco Tolent Developments and this company is not only involved in the identification of new development schemes but is also providing management services to existing group property interests and development projects. The company has a number of excellent opportunities to expand this area of the Group's business, ranging from a major office and leisure development on the outskirts of Leeds adjacent to the new M1 extension at Swillington, to a proposed joint venture involving the redevelopment of a core site at the heart of Sheffield's principal shopping area. Our IT business, Amco Technical Services, provides product and bespoke software solutions principally associated with the provision of management information systems for both public and private sector organisations. Software sales were impaired during the latter half of the year, in part due to the public and private sector's general and largely misplaced apprehensions concerning Year 2000 issues. The company's sales and marketing activities have now been restructured and the business is expected to produce significantly improved results from its new and existing ranges of property management software during 2000. Amco Plastics continues to supply the civil tunnelling and mining industries with flexible ventilation ducting whilst continuing to diversify into other markets including the supply of ducting for industrial use, particularly in the temporary heat and air conditioning markets and it is intended to add high temperature and insulated ducting to this range during 2000. The company has broadened both its customer and product base for activity toy and leisure products. A major new contract for the manufacture of sun loungers for export will commence in February 2000 and it is expected that this will lead to further business in this area later in the year. The company's extruded product range has continued to expand and the introduction of increased automation of downstream functions has enabled it to compete for volume business supplying the cable manufacturing industry. Our Overseas activities now include a joint venture mining contract in Botswana; the activities of Prosec Amco in Zambia; exploration drilling activities in West Africa and Eastern Europe and mineral exploration consultancy in Central Asia,South America and Africa. O. H. Schmill Group Chief Executive 10 March 2000 AMCO CORPORATION PLC Consolidated profit and loss account for the year ended 31st December 1999 1999 1998 £000 £000 £000 £000 Turnover Continuing operations 64,949 73,455 Discontinued operations 53,485 78,496 -------- -------- 118,434 151,951 Decrease in work in progress (261) (1,363) Own work capitalised 0 1,066 -------- -------- 118,173 151,654 Raw materials and 35,694 41,408 consumables Other external charges 40,606 58,954 -------- -------- (76,300) (100,362) 41,873 51,292 Staff costs 32,208 40,203 Depreciation 2,789 2,423 Other operating charges 6,756 7,334 -------- -------- (41,753) (49,960) -------- -------- 120 1,332 Other operating income 42 149 -------- -------- Operating profit/(loss) Continuing operations (1,149) 443 Discontinued operations 1,311 1,038 -------- ------- 162 1,481 Share of loss of associated (149) (202) undertaking Exceptional item Loss on disposal of (739) 0 discontinued business Net interest (316) (233) -------- --------- (Loss)/profit on ordinary (1,042) 1,046 activities before taxation Taxation on (loss)/profit on (248) (50) ordinary activities -------- ---------- (Loss)/profit on ordinary (1,290) 996 activities after taxation Minority interest 19 0 --------- --------- (Loss)/profit for the (1,271) 996 financial year Dividends (3,561) (836) --------- --------- (Loss)/profit transferred to (4,832) 160 reserves -------- -------- (Loss)/earnings per share (11.1)p 8.0p (basic and diluted) -------- -------- There are no recognised gains or losses other than the loss for the year. CONSOLIDATED BALANCE SHEET AT 31ST DECEMBER 1999 1999 1998 £000 £000 £000 £000 Fixed assets Tangible assets 14,787 19,574 Investments 1,094 1,110 ------- -------- 15,881 20,684 Current assets Stock and work in progress 8,800 10,102 Amounts recoverable on 1,710 7,192 contracts Debtors 9,612 16,734 Cash at bank and in hand 2,735 4,410 -------- -------- 22,857 38,438 Creditors: amounts falling (21,037) (38,720) due within one year -------- -------- Net current 1,820 (282) assets/(liabilities) Total assets less current 17,701 20,402 liabilities Creditors: amounts falling (1,204) (4,257) due after more than one year Provisions for liabilities (335) (278) and charges -------- -------- (1,539) (4,535) -------- -------- 16,162 15,867 -------- -------- 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 12,873 12,578 -------- -------- Shareholders' funds 16,162 15,867 -------- -------- CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 1999 1999 1998 £000 £000 £000 £000 Net cashflow from operating (574) 328 activities Returns on investments and servicing of finance Interest received 192 495 Interest paid (359) (518) Finance lease interest paid (149) (210) ------ -------- Net cash outflow from (316) (233) returns on investments and servicing of finance Taxation 170 (580) Capital expenditure and financial investment Purchase of tangible fixed (1,321) (2,098) assets Sale of tangible fixed 815 544 assets Purchase of shares in 0 (139) associated undertaking Employee Share Ownership Plan - purchase of shares (19) (96) - disposal of shares 35 7 -------- -------- Net cash outflow from (490) (1,782) capital expenditure and financial investment Disposal Net cashflow on disposal of 1,599 0 subsidiary undertaking Equity dividends paid (550) (855) -------- -------- Net cashflow before (161) (3,122) financing Financing Repurchase of ordinary share 0 (1,404) capital Bank loans (824) 213 Capital element of finance (1,983) (1,375) lease rentals -------- -------- Net cashflow from financing (2,807) (2,566) -------- -------- Decrease in cash (2,968) (5,688)

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