AMEC Annual Report 2000

higher level of overheads typical of the engineering and
professional services acquired in the year.
Total operating profit in 2000 increased by £39 million to
£116 million. The increase is analysed as follows:
£ million
Consulting and Design 10
Operations Support 4
Construction Management 3
Construction 17
Property Development 1
Public Private Partnership 10
45
E-commerce and central costs (6)
Of this increase, £20 million related to acquisitions in the year,
principally AGRA Inc.
Interest*
There was a net interest charge in the year of £17 million,
compared with net interest income of £2 million in 1999.
Of the increase of £19 million, approximately £15 million
related to acquisitions in the year, the balance primarily
reflected increased finance charges arising in Public Private
Partnership companies, several of which are now fully
operational.
Operating capital employed
A segmental analysis of operating capital employed is as follows:
Class of business £ million
39
2000 1999
£ million
Client Support Services 72 35
Capital Projects 11 (74)
Investments 141 96
224 57
Of the overall increase of £167 million, £137 million related
to the acquisition of AGRA Inc. Of particular note, however, is
Capital Projects, where the move towards cost reimbursable
contracts is reducing the level of advance cash. In Investments
there has been an increase in land and work in progress
attributable to Property Development and an increase in the
equity participation in Public Private Partnership companies.
The Investments segment also includes the Grand Cayman
hotel.
Goodwill amortisation and exceptional items
Goodwill amortisation of £6.7 million related to businesses
acquired in the year. In addition, goodwill of £3.6 million,
previously written off to reserves, principally in respect of an
overseas business disposed of in the year, has been charged
to the profit and loss account.
*Before discontinued operations, goodwill amortisation and exceptional items.
Exceptional charges of £6.8 million were in respect of the
disposal of a number of non core businesses.
Goodwill capitalised
During the year, goodwill of £176 million was capitalised
relating to a number of acquisitions, principally AGRA Inc.
This can be analysed as follows:
£ million £ million
Total cost of acquisitions 244
Book value of assets acquired (118)
Fair value adjustments:
Revaluations 13
Alignment of accounting policies 19
Provisions 18
Net assets acquired (68)
Goodwill capitalised 176
Substantially all of this goodwill is expected to be amortised
over a 20 year period, at an annual rate of approximately
£9 million.
Taxation
Tax charge
The tax charge of £29 million represents 29 per cent of the
pre-tax profit*, an increase, as anticipated, from 26 per cent in
1999. This increase is attributable to the higher tax charge on
profits arising in North America. Going forward, the tax charge
is expected to be marginally above the underlying UK tax rate.
Deferred tax
There has been no recognition of any potential liability for
deferred tax of up to £10 million in relation to losses surrendered
by some of the Public Private Partnership companies in which
AMEC has an interest. Under current accounting standards,
no provision has been made given (i) the long period over which
this liability becomes payable, (ii) the uncertainty surrounding
whether the liability will actually crystallise, (iii) deferred tax
asset of £5 million arising in the UK from timing differences
and (iv) the potential deferred tax assets referred to below.
A deferred tax asset of £15 million has been recognised
in North America. In addition, there are further significant
unrecognised deferred tax assets in several overseas
territories, principally the US and Germany, which arise
from past trading losses and timing differences and which
may be utilised over time against future profits.
Cashflow and net debt
Net debt at 31 December 2000 of £212 million is stated before
deduction of the deferred consideration of £96 million arising
from the disposal of Fairclough Homes in 1999, which is
due to be received at the end of March 2001. If this deferred
consideration was deducted, net debt would have been
£116 million at 31 December 2000.
AMEC plc 27