Preliminary Results

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 Â£4.4 million before tax, Â£3.1 million after tax. However there were substantial surpluses on revaluation of properties of Â£3.3 million and on gains recognised in the pension schemes of Â£3.2 million before tax and Â£2.3 million after tax. There were therefore net recognised gains for the year of Â£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 Â£2.6 million. Further, after detailed investigation we have had to write off an additional Â£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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£105.3m from Â£90.6m in the previous year. Almost Â£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 Â£4.0m, a considerable reduction from the operating profit figure of Â£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 Â£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 Â£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 Â£0.3m compared to an income figure of Â£0.6m in 2002. This cost is the difference between the expected return on the pension scheme assets (Â£2.2m) and the interest on the pension scheme liabilities (Â£2.5m) in the year. Taxation The tax credit of Â£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 Â£3.5m (2002 - Â£4.1m) of capital expenditure in the year of which Â£1.6m (2002 - Â£1.8m) related to replacements in the Group's motor vehicle fleet. Of the balance of Â£1.9m, Â£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 Â£3.2m and total fixed assets in the Group increased to Â£16.2m as a result of a revaluation of the Group's properties which yielded a Â£3.3m revaluation surplus. Cashflow The Group had net debt at the end of 2003 of Â£3.3m, an increase of Â£1.2m from the net debt position of Â£2.1m at the end of 2002. Bank overdrafts have increased by Â£1.2m to Â£2.7m and cash at bank has decreased by Â£0.8m to Â£3.7m, leaving a net cash at bank figure of Â£1.0m at the end of 2003. Bank loans have reduced by Â£0.4m and the repayment of Â£2.2m of finance leases exceeds by Â£0.3m the inception of Â£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 Â£3.3m and net assets excluding the pension liability of Â£16.9m. I. Swire Group Financial Director 23rd April 2004 Profit and loss account for the year ended 31st December 2003 2003 2002 Â£000 Â£000 Â£000 Â£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 Â£000 Â£000 Â£000 Â£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 Â£000 Â£000 Â£000 Â£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

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