New boss Samir Brikho decides to focus on energy sector as problem contracts mount up

This week marked the end of an era for Amec, once the biggest contractor in the UK, after it emerged that the firm is to sell its construction business.

The news came after it announced a 拢90m writedown, mainly on contracts, including the clean-up of Ground Zero in the aftermath of 9/11.

It also warned the City that profit in 2006 would be 拢15m below the board鈥檚 previous expectations.

Samir Brikho, the new chief executive, has announced plans to focus the business on 鈥渉igh-end engineering and consultancy in selected energy and industrial markets鈥�. This would sever Amec鈥檚 roots in the construction industry after more than 100 years. Instead, it will focus on oil, gas, nuclear and wind energy.

The 拢90m hit means that Amec has made a total provision of more than 拢250m in the past two years, a period when the firm was led by Sir Peter Mason. About 拢70m of the latest provision stems from historic contracts.

The remaining 拢20m relates to 鈥渟eparation costs鈥� associated with former businesses. These include its French engineering division Spie, which Amec sold earlier this year, despite its being the most profitable part of the business. Amec also plans to sell Buchans, its loss-making precast concrete manufacturing business.

The business suffers from complexity and an excessive cost base

Samir Brikho, Amec

Amec has increasingly distanced itself from the building sector. Last year it moved from the construction and materials index on the stock exchange to relist as a support services company. The firm鈥檚 turnover was 拢4.9bn in 2005, the majority of which was accounted for by services.

Brikho, who was appointed as chief executive in October, said: 鈥淭he business suffers from complexity and an excessive cost base, but we now have a clear and deliverable plan to turn it around.鈥�

He said Amec鈥檚 target margin by 2010 was 8%. This compares with a margin of 3.1% in 2005.

Brikho said he would 鈥渂ring an end to the uncertainty that has been hanging over this company for too long鈥� 鈥� an uncertainty that has not been helped by a recent takeover attempt by First Reserve and Texas Pacific Group, both of which the board rejected.

The construction business comprises building and civil engineering, PPP, building and facilities services, and property development. Last year they generated a combined turnover of 拢1.3bn and made a 拢14m profit.

Amec鈥檚 shares dropped 2% to 410p a share.