German losses deepen at Amec

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The Independent Online
Amec, the construction group which fought off a bid from its Norwegian rivals Kvaerner at the end of 1995, yesterday painted a glowing picture of the outlook for the business, despite deepening losses from the German operations.

Describing the outlook for the group as "certainly more favourable than at any time in recent years", the chairman, Sydney Gillibrand, revealed that the group may seek a partner for Kittelberger, its German operation, which accounted for most of the more than doubled losses of pounds 8.9m from continental businesses in the first six months of the year.

Mr Gillibrand said they had yet to have any meaningful talks with prospective buyers of of the business, while Amec stressed that they were keeping an open mind on such a sale, which would anyway be a plan for the medium or long term.

In the meantime, the rationalisation announced last year is continuing. Turnover in 1998 is set to be cut to around 60 per cent of this year's target in an attempt to reduce contract risks in the depressed German market.

Separately, Mr Gillibrand squashed rumours that the group wanted to sell its Fairclough Homes housebuilding operation, but hinted it might be merged with another group. Profits there were pounds 4.5m in the first half, up from break-even before, after operating margins jumped from 4 to 6.5 per cent on a 31 per cent jump in the average price of houses sold to pounds 102,600. The chairman said he wanted to retain the earnings stream "for the foreseeable future - a couple of years".

The comments came as Amec reported a jump in group pre-tax profits from pounds 12.1m to pounds 40.2m in the half year to June, inflated by pounds 24.2m of gains on the disposal of peripheral businesses. As a reflection of its confidence in the future, the group is raising the interim dividend by 17 per cent to 1.75p.

Operating profits up from pounds 18.5m to pounds 19.8m benefited from a maiden pounds 2m contribution from Spie Batignolles, the French construction group in which Amec bought a 42 per cent stake this year. The group bore pounds 3m of costs from tenders under the Government's public finance initiative, up from pounds 2m for the whole of last year, but said it expected to recover most of them in the second half.