Doubts raised over value of demerged arm of Amec

A senior construction analyst this week warned investors that Amec’s demerged infrastructure business could end up worth almost nothing.

Mark Howson, analyst at investment bank ABN Amro, said that excluding the PPP investment business, he could identify £255m of “potential issues” at the group.

The £255m figure refers to “unagreed income”, which Howson defines as items of revenue/debtors placed on the balance sheet where the final outcome is not 100% certain at the time of the year-end.

Howson said: “We believe a number of such items were being carried on the balance sheet last year under this category.” He warned that his estimate of £255m could be lower than the real figure because “we cannot guarantee that we have unearthed every item of disputed income”.

In a trading update published last month, Amec chairman Peter Mason announced it would be making a £35m post-tax provision, associated with charges and contract provisions related to historic construction contracts. He added it was making a further £30m provision over future legal costs.

An Amec spokesperson said: “We recently updated the market on 16 June when we made full disclose of exceptional items – both gains and costs. We have said we have taken a cautious view and believe that we have now drawn a line under previously announced business closures.”

In May Amec sold its French services business Spie to a firm controlled by funds managed by private equity firm PAI for a gross value of £707m. Howson said this ought to place the group, which had been highly geared, “in an overall net cash position for now”.

Howson said: “There has been too much emphasis on the glossy side of Amec, with not enough on the potential risks.”