Contractor announces disappointing half-year results after restructuring costs knock £15.7m off bottom line.
Amec's shares fell 15% last week after the group revealed only slight increases in pre-tax profit and turnover but higher than expected restructuring costs for the first six months of the year.

The group's shares fell 53p, from 359p to 306p, after the results were released last Thursday. Amec's pre-exceptional, pre-tax profit rose 7% from £38.8m to £41.6m for the six months to 30 June compared with the same period last year.

However, once goodwill and amortisation of £6.4m, exceptional costs of £15.7m and other expenses were taken into account, the group's profit dropped to £12.3m. Amec's turnover rose just 2% to £2.1bn: the group said it was hit by lower demand in some markets.

The unexpectedly poor results led analysts to cut about £10m off forecasts for Amec's full-year pre-tax profit, reducing expectations from up to £130m to about £120m.

"The exceptionals for restructuring costs were bigger than expected," said KBC Peel Hunt analyst Stephen Rawlinson.

"They had said earlier in the year that the restructuring costs [in the UK and USA] would be more than £5m but they were actually £8m. The City reacted like it did because it doesn't like surprises. The prediction was not near enough."

But Rawlinson added that Amec was still a sound company and would benefit from the shake-up.

Amec said its restructuring in the UK, which it started in January, was nearly complete. The firm now has two main operating divisions in the UK.

However, chief executive Sir Peter Mason revealed that the restructuring at Amec Inc, its North American business, was just getting under way. The shake-up is designed to cut costs, turnover and management layers. The firm is also determined only to pursue contracts with higher margins.

Mason said the job losses "would be more in the order of 50 than 500" among Amec Inc's 7000 staff. "We're only just getting started.

We should have sorted this out sooner," he said.

Peter Janson, Amec Inc chairman and chief executive, left the group in May, with Mason taking over main board responsibility for the region.

An analyst told Building: "Mason didn't get his man in early enough – now he's doing it himself."

The restructuring is expected to cost another £3m in the six months to 31 December but Amec said it should save about £4m year once the shake-up is completed.

But on the positive side …

Amec has been buoyed by two major contract wins in the UK, despite posting disappointing results last week. Last Tuesday, Amec was appointed preferred bidder for the £300m contract to extend the Docklands Light Railway in London 4.4 km to London City Airport. The design, build and maintenance contracts are expected to be signed in mid-December with work starting early next year. The extension should be finished by autumn 2005. On Monday, a company half-owned by Amec was named preferred bidder for the £460m deal to provide property management services for the Ministry of Defence in Scotland. Amec Turner will handle the maintenance on more than 400 properties owned by the MoD for the next seven years.