Title: A World Leader in Technical Services and Project Management
1A World Leader in Technical Services and Project
Management
- Sir Peter Mason KBEChief executive
2Any forward looking statements made in this
presentation represent managements best
judgement as to what may occur in the future.
However, the groups actual results for the
current and future fiscal periods and corporate
developments will depend on a number of economic,
competitive and other factors including some of
which will be outside the control of the group.
Such factors could cause the groups actual
results for future periods to differ materially
from those expressed in any forward looking
statements made in this presentation. Unless
otherwise stated, amounts and percentage
movements throughout this presentation relating
to the profit and loss account are stated before
goodwill amortisation and exceptional items.
Amounts and percentage movements relating to
total operating profit and margin of the
Engineering and Technical Services, Oil and Gas
and Project Solutions activities are stated
before corporate costs, goodwill amortisation,
and exceptional items.
3Todays presentation
- Introduction to AMEC
- Engineering and Technical Services
- Oil and Gas
- Project Solutions
- Financial overview
- Where we go from here
- QA
4What we do - capabilities
DESIGN
DELIVER
SUPPORT
Decommission/ Clean-up
Maintenance
Construction
Operations
Project Equity
Procurement
Consultancy
Design
Total life-of-asset project management and
services capability
5Who we do it for
We work globally and locally for clients in the
public and private sectors
6Our main activities
2004 total operating profit 174 million
Project Solutions 1.4 billion total turnover
24 of total operating profit
Engineering and Technical Services 2.3 billion
total turnover 43 of total operating profit
24
43
33
Oil and Gas 1.2 billion total turnover 33 of
total operating profit
Before corporate costs, goodwill amortisation
and exceptional items
7Engineering and Technical Services
8Engineering and Technical Services
- 43 of 2004 group operating profit
- 2004 operating profit 75m up 8
- Multitechnical Services
- Environmental Services
- Design and Engineering Services
- Before corporate costs, goodwill amortisation
and exceptional items
43 of operating profit
2004 Turnover 2.3bn Operating profit
75m Operating margin 3.3 Net assets
(liabs) (8.1)m
Predictable, local business model
9Multitechnical Services
Engineering and Technical Services
- EADS
- Mechanical and electrical services
- Airbus A380 assembly facility, Toulouse
- Lighting the Eiffel Tower
- 78 kms of cables
- 40,000 connectors
- 20,000 bulbs
10Environmental Services
Engineering and Technical Services
- US Department of Energy
- Geomelt treatment of low-level radioactive waste
at Hanford, Washington - Stabilised waste can be stored safely for over
10,000 years
- National Guard Bureau
- Massachusetts Military Reserve, Cape Cod
- Firing range clean-up
- Impact area groundwater study
- Small arms range lead removal
11Design and Engineering Services
Engineering and Technical Services
- British Nuclear Group
- Over 25 years continuous experience at
Sellafield - Asset support services
- UK Ministry of Defence
- 7 year Regional Prime Contract
- Asset management services covering the whole of
the MoD's Scottish Estate - Around 400 establishments
12ETS competitors
Engineering and Technical Services
North America Environmental services CH2M
Hill URS Tetratech Design and engineering
services Aecom Fluor Jacobs SNC Lavalin
Continental Europe Multitechnical
services Cegelec Eiffage Forclum France
Telecom IBM Global Services Nextira One Suez
Tractebel Vinci -Energies
UK Design and engineering services
Mitie RPS Serco WS Atkins WSP
13ETS - Outlook
- Continued volume and margin improvement in
Multitechnical Services - Strong growth in Environmental Services
- Design and Engineering Services
- Continued growth from long-term framework
contracts - Restructuring of nuclear industry expected to
produce opportunities - Scope for improvement upon recovery in US
industrial markets - Overall volume growth and margin improvement
expected without any recovery in US industrial
markets
Volume growth and margin improvement
14Oil and Gas
15Oil and Gas
- 2004 operating profit 57m
- 33 of 2004 group operating profit
- Total life of asset support
- Design and asset support services
- Pipelines
- Canadian oil sands
- Before corporate costs, goodwill amortisation
and exceptional items
33 of operating profit
2004 Turnover 1.2bn Operating profit
57m Operating margin 4.7 Net assets 129m
Initial design through to long-term asset
support service
16What we doSome jargon explained
Floating Production, Storage and Offtake vessel
FPSO
Topsides
Jackets
17What we doSpecialist total life of asset services
Upstream
Pipelines
18Deepwater FPSOsUpstream
- ExxonMobil Angola
- Kizomba AB
- Joint venture design, engineering and project
management services contracts
- Woodside Energy Australia
- Joint venture front-end engineering and design on
the Enfield FPSO - Option to undertake full engineering procurement
and construction management services
19Canadian oil sandsUpstream
- Canadian Natural Resources Ltd
- Horizon projectGreen-field oil sands extraction
plant - Deer Creek
- Joslyn project
- Technical assistance
- Imperial Oil Canada
- Kearl oil sands
- Pre-feasibility study
- Shell Canada
- Muskeg River Mine expansion pre-feasibilty study
- Syncrude
- Aurora MineAdditional mining/materialhandling
system - North MineAdditional dry oil sand production
system
20What we doSpecialist total life of asset services
Upstream
Pipelines
Downstream
21Asset support servicesDownstream
Oil and Gas
- BP Grangemouth, UK
- Supplier of engineering services for over 35
years - Maintenance and shutdown activity involving
detailed engineering, planning, scheduling,
resource and supply chain management
22What we doSpecialist total life of asset services
Upstream
Pipelines
Downstream
23Oil and Gas Improved market position
- Increased activities worldwide
- UK North Sea Gulf of Mexico
- West Africa Caspian
- Canada Asia Pacific
- More work from new clients
- KOC, Kuwait
- KNOC, South Korea
- Woodside, Australia
- Paragon acquisition
Improved range of services and tier one status in
Houston
24Oil and Gas Changing business model
- Trend to fabrication in lower cost regions
- Accelerated change of focus in activities towards
higher-value services
- Vast majority of upstream lump sum contracts
completed in 2004 - One-off lump sum contracts being replaced by
longer-term services - Risk reduced
- Margin improved
- Order book up
Improving quality of earnings
25Oil and Gas Recent contract awards
ConocoPhilips Bayu Undan Operations
maintenance support Timor Sea
KOC Project management 5 years initial
contract Kuwait
Woodside Enfield FPSO Engineering project
management Perth
A wide range of substantial new contracts
26Competitors
Oil and Gas
Halliburton/KBR
Technip-Coflexip
Foster Wheeler
Aker Kvaerner
ABB Lummus
Wood Group
Hyundai
Bechtel
Chiyoda
AMEC
Fluor
Engineering and project management
Upstream
Oil sands
Operations maintenance services
Gas processing / LNG
Refining/Petrochemicals
Downstream
Pipelines
Operations maintenance services
27Oil and Gas - Outlook
- Strong competitive position
- Long-term client relationships in markets with
high barriers to entry - Stable margins in upstream engineering services
- Base fee plus performance related bonus
- Strong portfolio of contracts including long-term
reimbursable work
A market leading business
28Project Solutions
29Project Solutions
- 2004 operating profit 41m
- 24 of 2004 group operating profit
- Range of activities from project management to
construction - Construction Services
- PPP
- Developments
- Wind Energy
- Before corporate costs, goodwill amortisation
and exceptional items
24 of operating profit
2004 Turnover 1.4bn Operating profit
41m Operating margin 3.0 Net assets 66m
Promise of growth
30Construction Services
Project Solutions
- We do not pursue one-off projects where lowest
price is key - Strong client relationships in the public and
private sector - Transport
- Healthcare
- Defence
- Growth opportunities through continued strength
in UK government spending - Rail continues to offer opportunities in
Continental Europe and UK
Continuing opportunities
31Construction Services
Project Solutions
- UK Ministry of Defence
- New submarine berthing facility,
- Her Majesty's Naval Base Clyde
- Design, construct and commission
- New floating jetty
- Electrical and mechanical services
- Jetty support building
- Contract follows two years of initial concept and
definition work
- Channel Tunnel Rail Link UK
-
- 70 kms Folkestone to London high speed line
- Design, procure, install track, catenary and
mechanical and electrical systems
32PPP
Project Solutions
- Portfolio of 9 PPP projects
- Net present value 77 million net book value 42
million - Average discount rate of 10.5 used
(post-tax/pre-tax basis) - Recent preferred bids gt600m value to AMEC
- Colchester Hospital
- DLR Woolwich Arsenal extension
- South Lanarkshire Schools
- PPP equity commitments approaching 60 million
- Substantial value to be generated in the future
- Growth opportunities anticipated
Including preferred bids
Real profit potential
Real profit potential
33Project SolutionsPPP
Project Solutions
- AMEC PPP project
- State-of-the-art, 669-bed facility
- UK Highways Agency
- A1 upgrade
- AMEC PPP project
- Upgrade of 33 mile section of the
- A1 Darrington to Dishforth, Yorkshire
- Design, Build, Finance and Operate
- contract
University College London Hospital
34Developments
Project Solutions
- Major joint ventures
- ISIS Waterside regeneration
- English Cities Fund
- More than a dozen UK schemes under development
- Major schemes include Reading and Durham
- Awarded major project to regenerate Lewisham
- Planning approval expected for 3 million square
feet of developments during 2005 - Continuing significant annual profits expected
Activity levels set to increase
35Wind Energy
Project Solutions
- Onshore portfolio under development around
1,500MW - Includes 3rd parties share of capacity of around
400MW - Offshore portfolio pre-sold
- Planning applications progressed
- Kyle
- Lewis
Portfolio maturing
36Project Solutions - Outlook
- Significant opportunities in Construction
Services from UK government commitment to
sustained spending - Maturing portfolio of investments is expected to
generate substantial and growing annual profits
Substantial and growing annual profits
37Financial overview
- Stuart Siddall
- Finance director
38Total operating profitBy business million
Margin
2003
2004
Margin
- Engineering and Technical Services 75.3 3.3 69.8 3
.6 - Oil and Gas 57.2 4.7 58.2 4.3
- Project Solutions 41.4 3.0 40.2 2.7
- 173.9 3.6 168.2 3.5
- Corporate costs (24.3) (0.5) (26.5) (0.5)
- 149.6 3.1 141.7 3.0
- Total operating profit increased by 5.6
- Corporate costs reflect reduced North American
establishment - Overall margin increased
- Return on capital employed was 16.8 in 2004
- Before goodwill amortisation and exceptional
items
39Margin progressionOperating margin (per cent)
4.0
3.0
2.0
1.0
0.0
95
96
97
98
99
00
01
02
03
04
Before goodwill amortisation and exceptional
items
40Return on capital employed
Source Company accounts as at 8 Dec 2004
Before goodwill amortisation and exceptional
items Post-tax earnings(excluding goodwill
amortisation, exceptional items and interest)
divided by the sum of shareholders equity plus
net debt
41Profit conversion million
250
200
150
100
50
0
1 Jan 1996 31 Dec 2004
1 Jan 1996 31 Dec 2003
- Cash has historically matched profit and will
move back in line in 2005
Profit excludes goodwill write off and
amortisation Adjusted cash flow excludes
acquisitions, disposals and share transactions,
advanced cash, cash retained in SPIE prior to
March 2003, pensions debtor
42Balance sheet analysis( million)
2004
2003
- Payments on account (177.7) (180.3)
- Trade creditors (1,277.0) (1,163.8)
- (1,454.7) (1,344.1)
- Stocks/trade debtors 1,741.5 1,542.9
- Net current operating assets 286.8 198.8
- Months of turnover in stocks/debtors 4.2 4.0
- Months of turnover in creditors 3.1 3.0
- Ratio of stock/debtors to creditors 1.4 1.3
- Restated for changes in stock/debtor/creditor
offsets in SPIE balance sheet - Based on previous six months turnover
excluding joint ventures
43Average weekly net debt in 2005 million
-200
-250
-300
-350
-400
-450
-500
- Average net debt in 2005 is expected to decline
to around 350 million
44Orders
- Engineering and Technical Services
- Relationship between order intake and sales is
key - 2004 order intake exceeded sales
- Oil and Gas
- As at 31 December 2004 1.3 billion (2003 1.2
billion)
- Project Solutions
- As at 31 December 2004 1.1 billion (2003 1.2
billion)
45International Financial Reporting Standards
(IFRS)
- Implementation well advanced
- Key issues identified
- Expect to publish restated figures in June 2005
- No changes to contract accounting
- FRS 17 pre-tax pension surplus of 170 million
- Expected to be similar under IAS 19
- Remaining uncertainties looking forward
- IAS 39 Financial Instruments
- Concession accounting
46Outlook for 2005
Movement relative to 2004 profit base
- Rail Maintenance/share options
- North American industrial markets
- Increased contribution from Iraq
- Impact of Placing
- Acquisition of Paragon (Houston Oil Gas)
- Growth across all business segments
Confident of further progress in 2005
47Growth in dividendsDividends per share (pence)
12
10
8
6
4
2
0
2000
2001
2002
2003
2004
48Where we go from here
- Sir Peter Mason KBEChief executive
49AMEC Design, Deliver, Support
DESIGN
DELIVER
SUPPORT
Decommission/ Clean-up
Maintenance
Construction
Operations
Project Equity
Procurement
Consultancy
Design
Total life-of-asset project management and
services capability
50Increase share of existing client spendHeadroom
for growth North America
30
20
AMEC share of clients annual spend
Existing share
10
0
51Growth opportunities
- Steady growth in earnings from Engineering and
Technical Services - Volume and margin improvement
- Stronger position in Oil and Gas
- Improving quality of earnings
- Long-term growth market
- Exciting prospects in Project Solutions
- Opportunities in Construction Services
- Maturing portfolio of investments
Further growth in 2005 and beyond
52- Supplementary dataFinancials
53Whats in where
Project Solutions
Oil and Gas
Engineering and Technical Services
Defence
Upstream
Multitechnical services
Healthcare
Downstream
Environmental services
Transport
Oil sands
Asset support services
Education
Pipelines
Design and Engineering
Industrial
Previous segmental analysis
Developments/PPP
Wind energy
54Cash flow million
2004
2003
Opening net debt (218.1) (37.3) Cash flow from
trading activities Advance cash (2.6) 14.5
Other (19.2) 56.0 Net profit / (loss) retained
in joint ventures / associates 7.8 3.3 Acquisiti
ons / disposals/share issues 24.5 (177.0) Interest
, tax and dividends (74.9) (72.4) Currency and
other adjustments (1.2) (5.2) Closing net debt
(283.7) (218.1)
55Financial ratios
2004
2003
EBITDA 189.4m 189.3m Operating profit
(excluding PPP) 138.8m 131.1m Interest
(excluding PPP) 22.6m 20.5m Interest cover
(excluding results of PPP concessions) 6.1x 6.4x W
eekly average net debt 450m 360m Weekly average
net debt to EBITDA 2.4x 1.9x Excluding goodwill
amortisation and exceptional items
56Order book
Whats included
- Oil and Gas and Project Solutions activity
- Term/evergreen contracts to first contract break
point only - Projects at award values, adjusted for contract
growth - Engineering and Technical Services activity
(2.0bn sales in 2003) - Contracts with preferred bidder status
- Concession income streams of PFI projects
- Lifetime services value of PFI projects
And whats not included
57Contract risk management
- Varied range of contract terms
- - Cost reimbursable
- - Target cost
- - Pain/gain share
- - Lump sum
- Broad spectrum of contract sizes ranging from
less than 20K in Engineering and Technical
Services to hundreds of millions of dollars in
Oil and Gas - Contract duration varies from weeks to framework
agreements of up to 10 years - Increasing emphasis on negotiated cost
reimbursable/protected contracts and risk
management
58Contract risk management
Define business and project objectives
Define risk management plan
Identification
Assessment
Planning
Management
Feedback
59International Financial Reporting Standards
- Main balance sheet restatements
- IAS 8 Dividends
- IAS 19 Pensions
- IAS 12 Deferred tax
- IAS 16 Plant and equipment
- IAS 17 Leases
- IAS 31 Joint ventures PPP
- IAS 39 Financial instruments
Effect on net assets
60International Financial Reporting Standards
continued
- Main profit and loss account restatements
- IAS 31 Joint ventures - PPP
- IFRS 2 Share-based payments
- IFRS 3 Acquisitions (net)
- IAS 11 Construction contracts
- IAS 19 Pensions
- IAS 39 Financial instruments
Effect on EBIT
61- Supplementary dataProject Equity Investments -
PPP
62Investments PPP portfolio financially sound and
profitable
- Share of non recourse debt in projects 544
million - Operational 296 million
- Under construction 247 million
- Five projects operational
- Operating profit of 11 million (2003 11
million) - Support limited to equity commitments of 57
million - Contingent equity arising from adverse events
- AMEC share 11 million
- As at 10 March 2005, including preferred bids
63AMEC PPP projects Operational
Equity committed
Net equity invested
Date operational
Concession period
Equity stake
Fin. close
Transport
-
6.6m
1998
30 years
25
1996
A1(M) Peterborough to Alconbury
-
2.4m
1998
30 years
25
1996
A419/417 Swindon to Gloucester
Hospitals
-
2.9m
2000
45 years
50
1997
Cumberland Infirmary
Accommodation
-
0.5m
2000
30 years
50
1998
Inland Revenue Newcastle Estate
Water Treatment
-
1.9m
2002
30 years
25
2000
Ayrshire Wastewater Treatment
64AMEC PPP projects Delivery
Equity committed
Net equity invested
Date operational
Concession period
Equity stake
Fin. close
Transport
-
5.9m
2005
30 years
25
2000
A13 Thames Gateway
4.7m
-
2006
33 years
25
2003
A1(M) Darrington to Dishforth
7.2m
-
2005
30 years
50
2003
Docklands Light Railway City Airport extension
Hospitals
0.9m
8.4m
2005
38 years
33
2000
University College London Hospital
65AMEC PPP projects Preferred bidder status
Value to AMEC
Equity committed
Net equity invested
Date operational
Concession period
Equity stake
Fin. close
Transport
15m
14.9m
4.9m
2009
30 years
23
Q2 2005
Incheon Bridge, Korea
200m
11.5m
-
2008
30 years
50
Q2 2005
Docklands Light Railway Woolwich Arsenal extension
Hospitals
220m
9.5m
-
2009
30 years
50
Q4 2005
Colchester Hospital
Schools
290m
8.0m
-
2009
30 years
33
Q3 2005
South Lanarkshire Schools
Project management fee
66- Supplementary dataProject Equity Investments -
Wind Energy
67Wind energy terminology explained Rated
output and quantity of electricity produced
- Rated output is expressed in watts
- A watt is the energy needed to heat up 1 cm3 of
water by 1oC in 1 second - We use megawatts (1 MW 1,000,000 watts) to keep
the numbers manageable - Quantity of electricity produced is expressed in
watt.hours - A watt.hour is the quantity of electricity
produced in 1 hour by a device generating at a
rate of 1 watt - A unit of domestic electricity is 1000 watt.hours
or 1 kilowatt.hour (1 kWh) - We use megawatt.hours (1 MWh 1,000,000
watt.hours) or gigawatt.hours (1 GWh
1,000,000,000 watt.hours) to express the quantity
of electricity generated over a year - In wind, the output depends on rated output and
availability of wind to drive the turbines (the
typical wind farm produces about 30 of the
quantity that it would do if the wind blew
strongly all year round the capacity factor) - Example
- For a typical 50 MW wind farm, the annual energy
production would be 50 times 24 (hours in the
day) times 365 (days in the year) times 30
(capacity factor) - That is 131,400 MWh or 131.4 GWh
68AMEC Wind Energy
- Total portfolio under development is around 2,500
MW, broken down as follows - AMECs share of onshore developments 1,100 MW
- Third parties share of onshore developments
managed by AMEC 400 MW - Offshore developments where AMEC is providing
consultancy/project management services to
Centrica 1,000 MW - Value fundamentals
- Recent transaction value for onshore wind
projects of circa 390,000 per GWh p.a. - Capital cost of onshore wind farms 650-800/kW
- Confirm pre-tax returns of 20 achievable
69AMEC Wind EnergyOnshore portfolio
Name/Location Rating No of wind Tip Planning
(MW) turbines height (m) status 1.
Proposals being developed by AMEC Long-term
prospects, various 100 100 100 Pre-planning Kyle
Forest, Ayrshire 300 100 125 Planning
application submitted Q4 2004 Isle of Lewis
(AMECs 50) 351 117 140 Planning application
submitted Q4 2004 Clashindarroch,
Aberdeenshire 130 47 100 Planning application
submitted Q3 2003 Aultmore,
Moray 60 30 100 Planning application
submitted Q4 2003 Minch Moor,
Borders 20 14 100 Planning application
submitted Q2 2003 Edinbane, Isle of
Skye 50 27 100 Conditional consent Q4 2002,
awaiting planning notice Tees Wind North,
Teesside 25 9 140 Conditional consent (AMECs
50) Q2 2002, awaiting Corus decision on
land
70AMEC Wind EnergyOnshore portfolio continued
- Name/Location Rating No of wind Tip Planning
(MW) turbines height (m) status - Clachan Flats, Argyll Bute 16 9 79 Planning
notice received - 2. Projects developed by AMEC in the past and
sold to third parties - High Volts, Co. Durham 8 3 100 Operational (2004)
- Hare Hill, Co. Durham 5 2 100 Operational (2004)
- Holmside Hall, Co. Durham 5 2 100 Operational
(2004) - High Hedley, Co. Durham 2 3 71 Operational (2001)
- Kirkheaton, Northumberland 2 3 67 Operational
(2000) - Great Eppleton, Northumberland 2 4 70 Operational
(1997) - Blyth Harbour, Northumberland 3 9 41 Operational
(1993)
- Notes on the above
- Data based on planning submissions made or
management estimates where proposals are at an
earlier stage - Developments are subject to environmental and
planning risk until fully consented and to
delays in the commissioning of the national grid
infrastructure needed to support renewable energy
expansion
71AMEC Wind EnergyOffshore portfolio
- Name/Location Rating No of wind Tip Planning
(MW) turbines height (m) status - 1. Developments where AMEC is providing
environmental consultancy/project management
services to Centrica - Race Bank, Greater Wash c500 c100 tba Pre-planning
- Docking Shoal, Greater Wash c500 c100 tba Pre-plan
ning - Lynn, Skegness 90 30 150 Construction
pending - 2. Projects developed by AMEC in the past and
sold to third parties - Blyth Offshore, Northumberland 4 2 91 Operational
(2000)
- Notes on the above
- Data based on planning submissions made or
management estimates where proposals are at an
earlier stage
72Wind EnergyOnshore portfolio development
potential
Project Solutions
Potential capacity (MW)
1000
800
Conditional consent
600
Construction
400
In operation
200
0
2005
07
09
06
08
2010
- Assumptions
- Reflects projects as set out in
supplementary slides and includes AMECs share of
joint venture developments - Excludes any additional new developments
- Excludes projects developed by AMEC in the
past and sold-on to third parties - Based on planning submissions made or
management estimates where proposals are at an
earlier stage - Developments are subject to environmental and
planning risk until fully consented and to
delays in the commissioning of the national
grid infrastructure needed to support renewable
energy expansion