Where – if anywhere – does Amey go from here? After a turbulent five months, during which two finance directors made spectacular exits, the support services firm's largest shareholder has called for the group to be broken up or sold. Amey is resisting such a move, but that hasn't silenced the speculation in the Square Mile about the future of the company – or its chief executive, Brian Staples. And with Atkins also fending off takeover rumours after the departure of its own boss, the City has fallen out of love with the entire support services sector.
Only a year ago, analysts were portraying Laing as the apotheosis of everything that was bad about open tendering and Amey as the shining image of everything that was good about outsourcing. Now, unexpected losses, accounting woes and the political turmoil surrounding the PFI have shattered investors' confidence in support services. A year ago, Amey's share price was 435p. Now it's 30p. The company's predicament appears to be partly misfortune, partly mismanagement. It was unlucky that it was required to account for bid costs as they were incurred just when it was spending furiously in pursuit of large and lucrative outsourcing deals, yet unwise to front-load fee income on certain jobs. Result: a £55m pre-tax profit in 2001 had to be restated as an £18m loss. Then there is the suggestion that it has overvalued assets such as its stake in Croydon Tramlink – arguments over the correct write-down for that are said to have led to the departure of one finance director, Michael Kayser, after just five weeks. It's a sorry affair, but not one entirely of Amey's making. How many City analysts warned that trophy PFI ventures such as the Tube would proved every bit as hazardous as Laing's nemesis, Cardiff's Millennium Stadium? Or that facilities management deals are not risk-free 30-year gravy trains?
If some good is to come out of the travails of Amey and Atkins, perhaps it will be to destroy the mythology surrounding support services. Unlike contracting – which TV viewers now know to be as old as the pyramids – outsourcing and PFI are still in their infancy. We learn new, hard truths about the PFI every week: the outrageous tendering costs, the drain on resources, the perilous returns. But outsourcing has been misjudged, too. In the right hands, it can be profitable, and the income streams are lengthy – but margins are low and, on PFI projects, very slow in coming. Those who painstakingly built up a strong business model, such as Capita, are in robust shape. But newcomers – including refugees from contracting – would be well advised to adopt a similar line to that of Amazon's in the dotcom field and warn investors not to be fooled into thinking that hefty investment now means hefty profit just around the corner.
All of which may be too late to save Amey, or Staples. Despite the denials, there must be a chance that the business will be broken up if the whole is worth less than the sum of the parts. Amey's road maintenance arm, for instance, is believed to be in good shape. A better solution, though, might be for a white knight to step in and take the whole thing private – notwithstanding the fact that Mike Jeffries has ruled out such a move for Atkins. After the last six months, it may take as many years for Amey to restore its credibility in the City.