New boss Samir Brikho decides to focus on energy sector as problem contracts mount up

This week marked the end of an era for Amec, once the biggest contractor in the UK, after it emerged that the firm is to sell its construction business.

The news came after it announced a £90m writedown, mainly on contracts, including the clean-up of Ground Zero in the aftermath of 9/11.

It also warned the City that profit in 2006 would be £15m below the board’s previous expectations.

Samir Brikho, the new chief executive, has announced plans to focus the business on “high-end engineering and consultancy in selected energy and industrial markets”. This would sever Amec’s roots in the construction industry after more than 100 years. Instead, it will focus on oil, gas, nuclear and wind energy.

The £90m hit means that Amec has made a total provision of more than £250m in the past two years, a period when the firm was led by Sir Peter Mason. About £70m of the latest provision stems from historic contracts.

The remaining £20m relates to “separation costs” associated with former businesses. These include its French engineering division Spie, which Amec sold earlier this year, despite its being the most profitable part of the business. Amec also plans to sell Buchans, its loss-making precast concrete manufacturing business.

The business suffers from complexity and an excessive cost base

Samir Brikho, Amec

Amec has increasingly distanced itself from the building sector. Last year it moved from the construction and materials index on the stock exchange to relist as a support services company. The firm’s turnover was £4.9bn in 2005, the majority of which was accounted for by services.

Brikho, who was appointed as chief executive in October, said: “The business suffers from complexity and an excessive cost base, but we now have a clear and deliverable plan to turn it around.”

He said Amec’s target margin by 2010 was 8%. This compares with a margin of 3.1% in 2005.

Brikho said he would “bring an end to the uncertainty that has been hanging over this company for too long” – an uncertainty that has not been helped by a recent takeover attempt by First Reserve and Texas Pacific Group, both of which the board rejected.

The construction business comprises building and civil engineering, PPP, building and facilities services, and property development. Last year they generated a combined turnover of £1.3bn and made a £14m profit.

Amec’s shares dropped 2% to 410p a share.