Amey amasses pounds 100m war chest for acquisition spree

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Amey, the construction group whose shares have soared on the back of lucrative construction business it acquired as part of the privatisation of British Rail, yesterday said it was likely to go on an acquisition spree with a war chest of up to pounds 100m. It is eyeing up targets in the facilities management industry and is likely to complete at least one deal within the next few months.

Amey also said that the private finance initiative (PFI), the controversial scheme under which the Government contracts out construction work to the private sector, was finally beginning to take off after being dogged by severe delays.

Neil Ashley, Amey's chairman, said the group was confident it would soon be awarded a large PFI contract to build a hospital in Birmingham. The deal could herald a flood of new hospital contract awards. The Government is redrafting the rules on PFI hospital contracts, designed to reduce the risks faced by the private sector in the event of a hospital trust falling into financial difficulties.

The new rules should be implemented shortly, leading to the award of more than 25 projects to the construction industry. "The PFI is here to stay and there are many more projects in the pipeline," Mr Ashley said.

Amey has recently won a deal to build the Croydon Tramlink and a contract to build an extension of the M6 near Carlisle.

It is also bidding for pounds 400m of track renewal and signalling work from Railtrack, which has embarked on a pounds 10bn programme to upgrade Britain's ageing rail system.

The acquisition spree could transform Amey, which has seen its share price almost quadruple to 457.5p since the start of last year after it acquired a construction business from British Rail. Amey already has up to pounds 25.7m in the bank. The group said it would be comfortable with gearing at around 50 per cent, which would mean it would have at least another pounds 70m to spend on acquisitions.

"Facilities management work now accounts for three quarters of our business and we are in talks about a number of opportunities," Mr Ashley said.

Amey announced a 70 per cent rise in pre-tax profits to pounds 6.1m (pounds 3.57m) on turnover up 29 per cent to pounds 192m for the six months to June.