Amec announces £295m exceptional gain following sale of Amec Spie

Amec has announced that its exceptional gain resulting from the sale of Amec Spie, one of three divisions within the group, runs to £295m. The figure is £80m higher than expected.

Amec Spie had been put on the market six months ago and the City anticipated offers of around £400m to £600m. However, when the sale was finally announced on 22 May, a price of £710m had been struck, the buyer being PAI, a leading European private equity group.

A large chunk of Amec’s bumper windfall will be used to cut the group’s net debt which ran at £400m/week during 2005. The 2006 figure will be halved.

A lesser portion of the bonus, running to a total of £65m, will be used to cure a handful of internal problems.

Closure and exit costs will take £35m of this deck-clearance: £20m relating to former construction activities and £15m to oil/gas projects.

In November 2005, Amec said that the cost of getting out of road building on a lump-sum basis in the UK and US,together with certain building/refurbishment activities in the UK, would be £30m after tax. This was over-optimistic as the sort-out has cost an extra £20m.

The balance of £30m will go into the pot to cover future legal and other dispute costs:  £20m of this is the result of “exiting from certain construction activities in both the UK and US” which are beset by “prolonged and costly” contract disputes.

The £10m balance is to cover against two projects completed in the past where Amec had expected its insurance policies would cough up should claims be proven against the company. The insurance cover is not as water-tight as previously thought.