Provisions halve Amec's profit

Click to follow
The Independent Online
AMEC, the international construction and engineering group, has halved its interim dividend and made a pounds 12.3m provision to cover bad debts, contract cost overruns, and rationalisation in its Australian contracting business.

After the provisions, pre-tax profits for the six months to 30 June halved from pounds 21.9m to pounds 10.6m. The interim dividend, down to 2p, was uncovered by undiluted earnings of 0.7p (5.7p). The shares fell 7p to 60p, less than a third of the 200p price at which last year's pounds 11m rights issue was launched.

The provisions are on a handful of large projects in Sydney and Melbourne where the company is a sub-contractor. Amec is taking legal action to recover bad debts.

The Australian workforce has been cut by 50 per cent during the past 18 months, reflecting the depressed construction market. Sir Alan Cockshaw, chairman, said investment confidence in the large Australian commercial centres had almost disappeared.

Sir Alan believes that there will be no recovery in the construction sector in 1993. Against that background, if the Government went ahead with rumoured infrastructure spending cuts, the UK construction industry would be 'crucified', he said.

Turnover was down nearly 10 per cent in the period, reflecting the fall in building and building services activities. One bright spot was mechanical and electrical engineering in the UK and Europe, where a number of joint ventures have been established. Half-year profit in this division rose to pounds 22.1m from pounds 12.4m.

Housing and property losses increased from pounds 1.3m to pounds 2.3m as turnover fell from pounds 75.7m to pounds 40.5m. The number of houses sold fell from 550 to 433.

The Australian provision accelerated Amec's net outflow to pounds 60m. But it still has a net cash position of pounds 76m following the rights issue. The company expects the cash outflow to slow in the next six months and leave it ungeared at the year-end.