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Amey hit by £77m loss in highways division

Amey has swung to a group pre-tax loss after suffering restructuring costs and contract disputes in its highways business. 

The group’s highways arm posted an operating loss of £77m for the year to 31 December 2016, with a restructuring programme and two contract disputes hitting its bottom line. 

Amey’s highways division incurred exceptional charges of £9.9m and £5.5m following contract claims from Herefordshire County Council and Cumbria County Council respectively.

The firm confirmed it had “come to a mutual agreement” with Highways England to exit its contract for Areas 6 (covering East Anglia) and 8 (covering Cambridgeshire, Hertfordshire, Bedfordshire and parts of Suffolk) two years early, a process that completed earlier this year.

Construction News first reported Amey was set to quit the contracts last November, with Kier eventually taking over in both areas. 

In its latest results, Amey said its highways contract with Central Bedfordshire Council and Bedford Borough Council had also ended after more than 10 years.

The firm added that the highways division’s new management team – which includes MD James Haluch – had reviewed the business’s ongoing contracts, leading to “a more prudent assessment” of its contract portfolio.

The £77m operating loss at its highways division was the primary cause of an overall £43.9m group pre-tax loss in the year to 31 December 2016.

This compares with a group pre-tax profit of £23.6m in the prior year. 

Revenue at the firm excluding joint ventures was flat at £2.23bn.

Its utilities and facilities management arm and its consulting and rail businesses were both profitable, posting operating profits of £30.3m and £42.6m respectively.

Earlier this year, Amey was the only firm on the consultancy lot of Highways England’s Collaborative Delivery Framework to miss out on work following a major shake-up.

Under the rejigged model, companies on the design and engineering services lot of the CDF were able to bid for 13 packages, with every contractor promised at least one and a maximum of two. Despite this, Amey was the only firm not to be allocated a package.

New contract wins for the group’s utilities FM business include a deal with the Ministry of Justice to maintain its £212m, 2,100-capacity HMP Berwyn.

Amey also confirmed it had closed legacy issues in its power major projects division.

Overall, the group reported a total forward order book of £10.5bn.

Chief executive Andy Milner said the results reflected a market that had “plateaued”, adding: “Many of our customers have made large budget cuts and that will continue”.

“Our customers want more services and better delivery but have much less money,” he said.

“As well as challenging markets our business had become overly complex, some of our operations were not properly controlled, and the cost of running our business was too high.”

He added that the company had introduced a range of cost-saving measures throughout the year which had resulted in a saving of £15m.

These measures also incurred an exceptional cost of £17.3m and also led to staff cuts of more than 1,400 employees during the year.

“2016 was a challenging year but we have created a stable platform with improved transparency, accountability and performance, increasing our opportunity for future growth and success.”

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