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Birmingham dispute drags Amey into £190m pre-tax loss

6 July 2018 | By Neil Gerrard

Amey has been dragged into a £190m pre-tax loss by a troubled highways contract in Birmingham, which has seen it enter a dispute with Birmingham City Council.

The company reported flat revenue of £2.2bn for the year to 31 December 2017. It made a pre-tax profit of £14.7m but after an exceptional provision of £208.5m in relation to the Birmingham contract, that turned into a £190m pre-tax loss.

Its consulting and rail division made a £65.7m operating profit after exceptional items, while its defence arm added another £7.5m in profit.

However as a result of the exceptional charge, the highways division made a £222.8m operating loss, while utilities made a £22.7m loss and environmental services, facilities management, justice and defence together made a £15.5m loss.

The company's chief executive Andy Milner said Amey had performed "well, in comparison with many competitors". He pointed to a 0.9% improvement in its pre-exceptional gross profit margin, which generated positive cash flow of £32m.

He added: "Throughout the year, we continued to reduce our exposure to risk across the business by negotiating an early exit to a number of loss-making contracts in facilities management, highways, utilities and environmental services. This deliberate programme combined with business turnaround activity has substantially increased the stability and predictability of the business.

"We have been involved in a dispute with Birmingham City Council over the last 36 months regarding the scope of our contractual obligations in the core investment period and recent communications from the council make it clear than an exceptional provision of £208.5m needs to be accounted for in our 2017 results.

"This is in respect of our undertaking additional investment during the initial phase of the contract as well as expectation of high deductions and penalties to be applied by the council.

"Discussions are ongoing with the council and the provision made is expected to cover all outcomes anticipate at this current time.

"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."

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