Amec Foster Wheeler agrees to £2.2 billion takeover by rival Wood Group

Amec Foster Wheeler said it expects to raise about £100m before the end of the year from the sale of three assets on the market, while the engineering group confirmed that it continues to target £500m of disposals by June 2017.

The listed company revealed that it is now in talks to sell its core boiler business and the rest of GPG to separate buyers. Investors were told that Amec believes this is its best option to achieve an acceptable level of proceeds.

It added that it has made good progress on improving the organisation structure and leadership team as well.

Jon Lewis, chief executive of Amec Foster Wheeler, said: “We are on course to deliver resilient trading results for this year and next despite the continuing weakness in some of our key markets. This is only possible due to the diversity of our business and the initial contribution from additional sustainable cost savings we started in June.

“We have made good progress on the wide-ranging review we initiated in the summer. This has reinforced my belief Amec Foster Wheeler is a strong brand, with great potential. The review has also confirmed a number of challenges and highlights a range of new opportunities across our markets, as well as a significant and structural cost saving opportunity.

“To offset the current market challenges, we need to do more to establish the full potential of these growth opportunities and the optimal configuration of our portfolio, and therefore the best actions to deliver the appropriate balance sheet and sustainable returns to our shareholders.”

From 1 January 2017, the group will replace its existing geographical reporting structure with four “market-based business lines”. These are oil and gas, power, mining, and environment and infrastructure. The group is also creating a new ‘exco’ with ten direct reports to the chief executive, the majority of whom will be new in the roles.

Meanwhile, Amec said that the detailed review of its business and capabilities has “identified multiple long-term opportunities to offset the current headwinds in traditional areas such as offshore greenfield oil and gas and mineable oil sands”, but more work is required to develop detailed plans on how to deliver their full potential. It also reported that very good progress has been made on “identifying sustainable overhead cost reductions”.

Amec’s focus is on delayering management, removing overlapping functions, reducing indirect procurement, and investing in new systems and processes that will increase efficiency. Actions taken to date include identifying making about 650 job cuts, closing offices, and accelerating plans to outsource back-office functions to low-cost locations.

The combined impact of proposed investments and reduction in overheads means that the group is planning to take an additional £100m permanently out of its annual cost base. It expects these savings will have some impact on 2017 trading results, achieving their full run rate by 2019.

Meanwhile, Amec announced that revenues were up by 3 per cent to £4.1m in the nine months to the end of September 2016 and 3 per cent lower on a like-for-like basis. The order book stood at £6.1bn at the end of September, compared to £6.2bn at the half year.

Including the £100m of disposal proceeds referred to above, and updating for recent sterling weakness and further restructuring charges, forecast year-end net debt is now £1.1bn.

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