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Amey suffers £190m loss driven by Birmingham dispute

Amey has reported a £189.8m pre-tax loss for 2017 after it was forced to make a significant provision for its problem roads contract with Birmingham City Council.

The infrastructure specialist made a £208.5m provision to cover extra investment needed to meet contract milestones and to cover future deductions it expects the council to make.

Amey has been in a three-year battle with the council over the scope of its work on a 25-year £2.7bn roads maintenance PFI.

Last month it was ordered to pay £54m to the council for work an adjudicator said Amey had not carried out under the deal.

In February, Amey also lost a judgement to the council at the Court of Appeal over its interpretation of the contract terms.

The company has requested permission to appeal the judgement at the Supreme Court.

With the exceptional charge on the Birmingham road contract excluded, the company made an underlying pre-tax profit of £14.7m, compared with an underlying loss of £9.9m last year.

Revenue for the company was broadly flat at £2.59bn for the year to 31 December 2017.

Chief executive Andy Milner said: “Although market conditions continue to present challenges in some sectors, Amey has performed well in comparison with many competitors.”

Amey said its Fit 4 the Future transformation had helped the company’s underlying performance return to profit and generate a positive cashflow of £32m.

The focus of Fit 4 the Future has been to improve cost control and efficiency, and the company is now takes steps to simplify its business operations.

Revenue for Amey’s highways division slipped from £542.1m to £512.7m in 2017, while its operating loss – excluding the Birmingham contract provision – was £14.2m, down from a £70.2m loss last year.

The company said the division was now going “back to basics” with better governance and “thorough financial scrutiny”.

Amey’s utilities business also struggled in 2017, with revenue falling from £580.2m to £530.3m and the division reporting an operating loss of £22.7m compared with a profit of £5.5m the year before.

Its rail and consulting arm reported a strong 2017, however, with revenue climbing more than 13 per cent from £485.5m to £550.5m.

Operating profit for the division was also up from £43.6m in 2016 to £67.6m last year.

The rail and consulting business added £700m to the company’s order book in 2017, which included a £350m contract for the electrification of the TransPennine route.

However, it was reported last weekend that the scheme could be scrapped in favour of alternative upgrades.

In February this year Amey took on Carillion’s rail business, which Mr Milner said was driven by “increased confidence” in its own rail operations.

In March the company set out a new corporate strategy entitled Better Places, which will see Amey focus on work in higher-margin sectors including rail, consulting and defence.

Mr Milner said: “Despite the difficulties Amey has faced on the Birmingham contract, 2017 has been very positive for the business and completes a significant part of the evolution of Amey.”

Last June the company received a £200m equity boost from its parent company Ferrovial.

This was mainly to fund the payoff of an intercompany loan to Ferrovial subsidiary Landmille.

Total borrowing for Amey fell £180m from £639.5m in 2016 to £458.7m in 2017.

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