RNS Number:4440S
AMCO Corporation PLC
06 March 2007
AMCO CORPORATION PLC ("AMCO" OR "THE GROUP")
6th March 2007
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2006
CHAIRMAN'S STATEMENT
Following the death of Stuart Gordon, chairman of the Group, on Sunday 4 March
2007, I have agreed to delay my planned retirement for the time being and will
act as interim Chairman until I am replaced by Mr Peter Hems who joins the
Company on 1 April 2007.
Results before taxation
I am pleased to report substantially improved results for 2006. The profit
before taxation for 2006 was #8.9 million compared with #7.0 million in 2005.
This was on total turnover of #136 million as compared with #126 million for
2005.
Structural steel
Structural steel activities had an extremely good year and returned operating
profits of #3,997,000.
Property
Property development and investment returned operating profits of #3,352,000.
Specialist engineering
Specialist engineering operating profits of #1,569,000.
Manufacturing
There were operating profits of #504,000.
Earnings per share
Earnings per share were 53.0 pence for 2006 compared with 42.7 pence for 2005.
Dividend
I am delighted to announce a recommended final dividend for 2006 of 6 pence per
share payable on 2nd July 2007 to shareholders of record on 8th June 2007. This
will increase the total dividend paid and proposed in respect of 2006 to 13
pence, an 18% increase over the 11 pence paid in respect of 2005.
Liquidity and capital resources
The Group had net debt at 31st December 2006 of #4.8 million as compared with a
net funds in hand position at 31st December 2005 of #4.1 million. Shareholders
funds increased from #10,043,000 at 1st January 2006 to #17,062,000 at 31st
December 2006.
Pension Schemes
The net deficits on the Group's final salary pension schemes reduced by #4.0
million to #8.6 million at 31st December 2006.
We intend to make additional contributions, in excess of normal contributions,
to the schemes of #1.4 million in 2007.
Prospects for 2007
Following the termination of possible offer discussions announced earlier in the
year the Board is now focused on driving the continuing development of the Group
and I am pleased to report that prospects for 2007 are good.
Structural steel activities continue to be buoyant and another good year is
expected in 2007.
Due to timings associated with present developments in progress, property
development results in 2007 are likely to be less profitable than in 2006.
We anticipate satisfactory profits from specialist engineering activities in
2007.
Plastics manufacturing is expected to have an acceptable year in 2007.
Dosco continues to operate in a very difficult market but we anticipate
reasonable profits in 2007.
Management and workforce
I should like to thank all directors and employees for their efforts and
enthusiasm in 2006 which have contributed to a significant extent to the very
pleasing outcome to the year.
M.R. Speakman
Interim Chairman
6th March 2007
OPERATIONAL REVIEW
Overview
The Group's focus on the development of its structural steel, property
development, specialist engineering and manufacturing businesses continues.
The results in 2006 were a further improvement on the figures registered in
2005.
Provided that the structural steel market remains relatively buoyant, the
completion of property development projects currently in hand and the
progressive growth of our specialist engineering activities are maintained then
the Group should achieve a further satisfactory performance in 2007.
2006 was a year of high capital investment within the Group as we consolidated
our position in the niche markets that we service. There was further investment
in modernising the steel facilities, particularly in our Yate factory and
additional drill rigs were acquired to support and expand our overseas
exploration drilling operation in Guinea. We will continue to make investments
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
Health and Safety remains at the core of the Group's operations and we continue
to maintain our year on year improvement in Health and Safety performance.
Billington Structures in particular has reinvigorated its system of monitoring
and seeking improvements in Health and Safety by introducing a tiered structure
of working groups, which make use of the experience and ideas of those most
closely involved and at risk, both in its factories and on sites.
During 2007 the Group will maintain its focus on the minimisation of Health and
Safety risk through the identification and elimination of workplace hazards and
the implementation of improvements in the areas of behavioural safety,
occupational road risk and the management of sub contractor performance.
Management Systems
2006 saw further progress made in relation to the review and development of
management systems within the Group. Both Amalgamated Construction and
Billington Structures have achieved continued success with the further
development of their "Workspace" and "BILLMISS" electronic management
information systems.
The project to develop a process based electronic management system for Dosco
Overseas Engineering is nearing completion and the system is programmed to go
live in February 2007.
Companies within the Group have all successfully maintained ISO 9000 (Quality)
and ISO 14000 (Environmental) certification of their management systems during
2006. Billington Structures has achieved certification to the Occupational
Health Standard OHSAS 18001 and Amalgamated Construction will be seeking
certification to OHSAS 18001 during 2007.
Training and Development
Substantial investment in employee training and development has been made in
2006 and increased levels of investment are envisaged during 2007.
The increased manpower levels within Amalgamated Construction, following the
award of the three Network Rail Minor Works Framework Contracts, has required
specific attention throughout 2006 to ensure that new employees have received
the training required to enable them to fully meet the company's operational
requirements.
The ongoing development of employee skills, knowledge and competence is seen as
fundamental to the achievement of our longer term strategic objectives and as
such will continue to be the focal point around which our training and
development strategy is developed. However it is also clearly recognised that
continued professional and career development are crucial in respect of longer
term employee retention and opportunities for improvement will be sought in
these areas during 2007.
Both Amalgamated Construction and Billington Structures continue to actively
support the construction industry's national initiative of achieving a fully
qualified workforce.
Billington Structures continued to build on its relationships with local schools
and universities, which have helped it to maintain apprenticeship schemes in its
factories and a graduate engineer scheme in its technical department.
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 but they
also earn acknowledgement from our clients.
The ongoing development and promotion of good environmental practice,
underpinned by sound environmental awareness and employee training, is seen to
be a key issue in continued business success.
Billington Structures enthusiastically supports an initiative developed by its
trade association, in turn encouraged by the Government, for a Sustainability
Charter for the industry. There are three classes of membership and Billington
Structures is one of only two companies in the industry to be awarded the
highest, the Gold Standard.
Structural Steel
Billington Structures enjoyed a further record year for turnover and profit in
2006. It benefited from the generally favourable conditions in the construction
industry, but also from its policy of developing long-term relationships with a
number of major contractors and clients.
Among the projects supplied with steelwork were a major town centre
re-development at Bishops Stortford, the new grandstand at Doncaster
race-course, a number of schools and hospitals, a new warehouse for Corus at
Scunthorpe and a transport interchange in Barnsley.
The company's safety solutions division, easi-edge, had a year of strong growth.
There was expanding demand for its safety barrier system, as the industry
increasingly saw the need to provide a more substantial method of protecting
workers at height than is provided by the traditional scaffolding poles. It also
benefited from its growing portfolio of new products, including a well-received
system for guarding stairs and an innovative product to protect workers loading/
unloading trailers called "Trailarrest".
It was a record year for investment. The growth of the easi-edge hire business
needed supporting with considerable expenditure on additional barriers and the
strong growth in structural steelwork encouraged the Group to make a substantial
investment in modernising and increasing the capacity of its Yate factory. This
facility, which at the start of the year, was only capable of producing half the
output of the Wombwell factory, is now on occasion producing in excess of
Wombwell. The main item of spend was a next-generation Ficep CNC saw/drill.
Another major investment by the Group to support growth in the business was an
extension to the main office-block at Wombwell. This was completed just prior to
the end of the year.
Hollybank Engineering is the Group's other structural steel business. It
supplies the underground mining industry, in particular the UK coal industry. In
consequence, its market has been declining over a number of years. A particular
blow in 2006 was the closure of one of its principal customers, Tower Colliery.
In spite of the difficult conditions in which it operates, it still managed to
trade profitably in 2006. Conditions are currently even tougher and 2007 is
likely to be very difficult for the company.
Property Development
Amco Developments enjoyed a record year for turnover and profit in 2006.
The Arundel Street, Sheffield residential development of 68 apartments was
successfully completed in December 2006 with over half of the units having
already been sold or under offer.
Planning for 50 apartments in phase one of the larger mixed use development at
Summerfield Street, Sheffield was successfully achieved and work has commenced
on site in January 2007. All 50 units in the phase have successfully been sold
off plan. Phase two which comprises of 205 apartments, 20,000 sq.ft. of offices
and some 5,000 sq.ft. of retail space is likely to commence on site in late
2008.
A number of other exciting opportunities have been secured. These include a
scheme for 129 apartments in Dewsbury with work expected to commence on site in
the third quarter of 2007 and a scheme for 21 apartments in Bradford where work
is anticipated to commence in the second quarter of 2007.
Phase four of the successful Temple Point business park in Leeds currently being
undertaken in a joint venture with Tolent has been completed and sold to an
investor.
Amco Developments continues to actively identify other development opportunities
to build on what has been a highly successful 2006.
Specialist Engineering
Amalgamated Construction is the multi-disciplinary specialist engineering
subsidiary of the Group, operating throughout the UK across the rail, civil,
mechanical and electrical engineering sectors. It also provides exploration
drilling services in West Africa. The business again had a successful year in
2006 reflecting the continued strong demand for its specialist engineering
activities.
The rail business achieved significant growth throughout the period and further
consolidated its position in the rail market throughout the UK through the
successful delivery of multi-disciplined civils, structures, building,
maintenance and engineering projects for Network Rail, train operating companies
and major rail contractors. In 2006 the company was awarded Minor Works
framework contracts for three Network Rail Territories. This #20 million per
annum contract is for a period of 3 years with an optional 2 year extension. The
company specialises in tunnel and shaft refurbishment, bridge and structures
replacement and refurbishment, trackside civils works, new build and
refurbishment of stations, signal boxes and lineside structures, specialist
mechanical and electrical refurbishment and the delivery of a wide range of
minor works maintenance services. Projects undertaken in 2006 included major
tunnel and shaft repairs, viaduct repairs, embankment stabilisations, earthworks
and drainage schemes, the Monkwearmouth bridge refurbishment and the Wallingford
Road bridge replacement in Goring.
The engineering business provides a range of multi-disciplinary design, project
management, turnkey contracting, installation, commissioning and maintenance
services to the power, water, nuclear, utilities, ports, mining and
manufacturing industries. Current and recent projects cover mechanical and
electrical services, bulk materials handling installations, moving structures
and fluid power engineering for a range of clients including Magnox, National
Grid, E-on, SSE, British Energy, RWE Innogy, the Environment Agency, British
Waterways, Network Rail, the Oil and Pipelines Agency and Local Authorities.
Major projects undertaken in 2006 include Monkwearmouth rail bridge
refurbishment, Exeter Canal swing bridge and bascule bridges refurbishment and
Ardrishaig swing bridge refurbishment.
The civil engineering business is focussed on civil and multi-discipline
engineering contracts across the energy, water, utilities, transport and public
sectors. It specialises in the project management and delivery of
multi-discipline engineering projects, both traditional and design-construct,
drawing on specialist skills and resources from around the company. It retains
specialist skills, resources and plant relating to the construction, maintenance
and refurbishment of below ground structures and engineering projects including
tunnels and shafts. The company has been working with Dundee City Council
throughout 2006 under an Early Contractor Involvement arrangement to assist in
design development and advise on construction options, logistics, rail
interfaces and programming for the Dock Street rail tunnel strengthening
contract. The #6m contract works started at the beginning of 2007.
The exploration drilling company is based in Guinea, West Africa. The business
continued to expand its operations with the acquisition of four new drill rigs
in 2006, two of which have been commissioned in early 2007.
Manufacturing
Dosco Overseas Engineering had a successful year in 2006 with turnover being
some 24% higher than that achieved in 2005. The company continues to focus its
activities and services away from its traditional core market, which centred on
the UK mining industry, and whilst this market remains important, 2006 saw
approximately 80% of the turnover generated overseas.
During 2006 the company successfully sold further MK4 roadheaders into the
Chinese coal mining market as well as completing machine orders for the
Dominican Republic, Russia and the United States. In addition spares sales were
generated in eleven different countries in addition to the UK. The company has
now successfully supplied equipment into three of the top ten coal producers in
China as well as two of the largest producers in Russia, the company's two key
markets.
Significant orders for 2007 have so far been received from China, Russia and the
Middle East. The Chinese orders are from two different coal mining bureaus and
are for two machines each. The Russian order is for major ancillary equipment to
form the back-up system behind a Dosco roadheader and the Middle Eastern order
is a major spares order to support previously supplied Dosco equipment. In
addition to the mining sales currently secured the company also has two pipe
conveyor orders, one for the UK and one for Poland.
The success achieved to-date together with our strategy of focussing on key
export markets and core products, namely roadheading and material handling
equipment, provides a solid base for the company's continued structured and
sustainable growth in worldwide markets.
During 2006 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. To enable it to meet the demand created in the year two
new extrusion lines were brought into service along with 6,500 sq.ft. of
additional storage space.
Amco Plastics increased sales of extruded product to the UK cable industry and
became the sole supplier of tube to the UK paint roller industry.
After some design difficulties the company successfully completed the supply of
10 kilometres of 2.5 metre diameter tunnel ventilation ducting to the high speed
train link from Spain to France at Le Perthus and La Jonquera.
FINANCIAL DIRECTOR'S REPORT
Results
Total turnover (including the increase in work in progress) in the year ended
31st December 2006 increased by 15.2% to #145.1m from #126.0m in the previous
year.
The Group reported a total operating profit for 2006 of #8.9m a 23.6% increase
on the profit achieved in 2005 of #7.2m. Operating margins increased in the year
from 5.7% to 6.1%.
Taxation
The tax charge of #2.8m in the year equates to an effective corporation tax rate
of 30.8% on the Group's profits.
Profit and dividends per share
Earnings per share were 53.0p in 2006, which compares with earnings per share of
42.7p in 2005. During the year a final dividend of 11p per share was paid in
respect of the 2005 results and an interim dividend of 7p per share paid in
respect of the 2006 results. A final dividend of 6p per share is proposed in
respect of the 2006 results which would result in total dividends in respect of
2006 of 13p, an increase of 18.2% over the comparative 2005 dividend.
Capital expenditure
The Group continued to invest in capital equipment with a further #6.9m (2005 -
#3.3m) of capital expenditure in the year of which #1.9m (2005 - #1.8m) related
to replacements in the Group's motor vehicle fleet. Of the balance of #5.0m,
#2.4m was in respect of new equipment in the structural steel businesses, #1.5m
on construction drilling equipment, #0.8m on an office extension with the rest
invested in plant and equipment throughout the Group. The depreciation charge
for the year was #2.9m which, together with sundry disposals, caused the total
fixed assets in the Group to increase by #3.6m to #18.7m.
Cashflow
The Group had net debt at the end of 2006 of #4.8m, an increase in net debt of
#8.9m from the net funds position of #4.1m at the end of 2005. There was a net
cash outflow during the year of #5.8m and an increase in bank loans, primarily
to fund property developments of #3.0m. The large outflow of funds during the
year resulted from an increase in working capital of #9.8m, fixed asset
acquisitions of #6.9m, #2.1m of dividend payments and #1.5m of additional
contributions to the defined benefit pension schemes. The large increase in
working capital in the year largely related to two separate events. One of these
was the acquisition of land in Sheffield for a large property development and
the other was a result of the awarding to Amalgamated Construction during the
year of the Minor Works framework contracts for two additional Network Rail
Territories. The Network Rail payment terms on these contracts requires the
company to invest considerable sums of additional working capital.
Pension Schemes
The deficit on the Group's pension schemes as calculated by FRS 17 reduced
during the year by #4.0m to #8.6m after allowing for deferred tax. This
reduction in the deficit was a result of changes in the actuarial assumptions
underlying the present value of the scheme liabilities and better than
anticipated returns on the schemes' assets. The actual return on the scheme
assets of #5.2m was #2.2m in excess of the anticipated return and the Group made
contributions in the year #1.5m in excess of the current service charge. In
addition the #2.1m of further actuarial gains caused the gross deficit to reduce
by #5.8m before deferred tax. The Group intends to make additional contributions
to the pension schemes in 2007 of #1.4m.
International Financial Reporting Standards (IFRS)
The Group is required to issue its financial statements for the year ending 31st
December 2007 in accordance with IFRS, including the June 2007 interims, in line
with mandatory AIM rules. The directors have started to consider the
implications of these requirements, and in particular which areas of the Group's
balance sheet and results would be significantly affected by the adoption of
IFRS. This process has not been completed to date, but the key areas where
differences in treatment between UK GAAP and IFRS may arise include:
IAS 12 Income Taxes (Deferred Tax)
IAS 16 Property, Plant and equipment
IAS 31 Interests in joint ventures
IAS 11 Construction Contracts
A further update on IFRS matters will be provided to shareholders in due course,
once the impact of the changes can be quantified in a sufficiently reliable
manner and also in the interim report for the period ending 30 June 2007.
I. Swire
Group Financial Director
6th March 2007
Profit and loss account for the year ended 31st December 2006
2006 2005
#000 #000 #000 #000
Total turnover (including share of
turnover in joint 135,730 125,982
ventures)
Increase in work in progress 9,396 46
145,126 126,028
Less: share of turnover in joint (7,832) (7,222)
ventures
Group turnover 137,294 118,806
Raw materials and consumables 50,798 44,019
Other external charges 37,472 25,140
(88,270) (69,159)
49,024 49,647
Staff costs 36,298 37,783
Depreciation 2,905 2,349
Other operating charges 3,010 3,043
(42,213) (43,175)
Group operating profit 6,811 6,472
Share of operating profit in joint 2,092 739
ventures
Total operating profit 8,903 7,211
Net interest 10 (68)
Other finance income /(cost) 24 (192)
Profit on ordinary activities before 8,937 6,951
taxation
Tax on profit on ordinary activities (2,751) (1,971)
Profit transferred to reserves 6,186 4,980
Earnings per share (basic and diluted) 53.0p 42.7p
Statement of total recognised gains and losses for the year ended 31st December
2006
2006 2005
#000
Profit for the financial year 6,186 4,980
Actuarial gain/(loss) recognised in the pension scheme 4,291 (1,858)
Movement on deferred tax relating to pension liability (1,734) 342
Current tax relating to pension liability 447 215
Total recognised gains for the year 9,190 3,679
Consolidated balance sheet at 31st December 2006
2006 2005
#000 #000 #000 #000
Fixed assets
Tangible assets 18,735 15,136
Investments 0 350
Investments in joint ventures:
share of gross assets 4,765 12,595
share of gross liabilities (3,515) (10,934)
1,250 1,661
19,985 17,147
Current assets
Stock and work in progress 21,591 11,381
Amounts recoverable on contracts 8,230 957
Debtors 13,756 15,823
Cash at bank and in hand 3,427 7,738
47,004 35,899
Creditors: amounts falling due (38,246) (28,653)
within one year
Net current assets 8,758 7,246
Total assets less current liabilities 28,743 24,393
Creditors: amounts falling due (3,089) (1,710)
after more than one year
Net assets excluding pension 25,654 22,683
liability
Pension liability (8,592) (12,640)
Net assets including pension 17,062 10,043
liability
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 3,284
Other reserves (869) (798)
Profit and loss account 11,358 4,268
Shareholders' funds 17,062 10,043
Consolidated cashflow statement for the year ended 31st December 2006
2006 2005
#000 #000 #000 #000
Net cash (outflow)/inflow from operating (1,988) 7,702
activities
Distributions from joint ventures 2,450 0
Returns on investments and servicing of
finance
Interest received 201 159
Interest paid (49) (87)
Hire purchase interest paid (151) (140)
Net cash inflow/(outflow) from returns 1 (68)
on
investments and servicing of finance
Taxation (1,552) (486)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (4,981) (1,499)
Sale of tangible fixed assets 805 702
Net cash outflow from capital
expenditure and (4,176) (797)
financial investment
Acquisitions and disposals
Sale of investment 372 0
Net cash inflow from acquisitions and 372 0
disposals
Equity dividends paid (2,100) 0
Net cash (outflow)/inflow before (6,993) 6,351
financing
Financing
Bank and other loans 3,047 (2,290)
Capital element of finance lease rentals (1,771) (1,739)
Employee Share Ownership Plan
- purchase of shares (104) (230)
- disposal of shares 33 28
Net cash inflow/(outflow) from financing 1,205 (4,231)
(Decrease)/increase in cash (5,788) 2,120
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 2005, which have remained
unchanged for the financial year ended 31st December 2006.
2. Accounts
The summary accounts set out above do not constitute statutory accounts as
defined by Section 240 of the UK Companies Act 1985. The summarised consolidated
balance sheet at 31 December 2006, the summarised consolidated profit and loss
account, the summarised consolidated cash flow statement and the summarised
statement of total recognised gains and losses for the year then ended have been
extracted from the Group's 2006 statutory financial statements upon which the
auditors' opinion is unqualified. The statutory financial statements for the
year ended 31 December 2006 were approved by the directors on 6th March 2007,
but have not yet been delivered to the Registrar of Companies.
3. Earnings per share
Earnings per ordinary share have been calculated on the basis of profit for the
year after tax, divided by the weighted average number of ordinary shares in
issue in the year (excluding those held in the ESOP Trust) of 11,674,408 (2005 -
11,654,508).
4. 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, WF4 3QZ. The Annual Report and Accounts for the year ended 31st
December 2006 will be posted to shareholders on or about 30th April 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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