Amey Plc

Sutton Courtenay
Abingdon
Oxfordshire OX14 4PP
United Kingdom
Telephone: (+44) 1235–848-811
Fax: (+44) 1235–848-822
Web site: http://www.amey.co.uk

Public Company
Incorporated: 1921
Employees: 6,278
Sales: £700.16 million ($1.01 billion) (2000)
Stock Exchanges: London
Ticker Symbol: AMY
NAIC: 561210 Facilities Support Services; 488999 All Other Support Activities for Transportation (pt); 561499 All Other Business Support Services; 541330 Engineering Services

Amey Plc has tried on a new hat for the 21st century. Formerly one of the United Kingdom’s largest public works construction companies, with a specialty in road building, Amey has shifted its focus to the support services sector, including railroad and highway maintenance services, facilities design, maintenance and management services for schools, hospitals, and other public and private structures, as well as infrastructure and support services for the public utilities and telecommunications sectors. The company also boasts a strong information technology component for both public sector and private industry customers. The company maintains a construction and civil engineering component, which does business primarily for its other divisions. In 2001, Amey restructured its operations into four primary divisions: Public Sector Services, Private Sector Services, Transportation Services, and Technology Services. In 2000, Amey posted revenues of more than £700 million ($1.1 billion). The company is led by CEO Brian Staples and Chairman Neil Ashley.

Quarrying Beginning in the 1920s

Amey PLC was initially founded by Ron Amey as a quarrying operation and gravel producer in the Thames Valley region. The company expanded as a general aggregates producer in the years leading up to World War II. By the end of the war, the company had emerged as one of the United Kingdom’s leading aggregates producers. The company leveraged this position with a move into road construction, setting up subsidiary Amey Asphalt. The company’s timing proved fortuitous, as the postwar reconstruction effort and then a lasting economic boom—which in turn sparked the rise of the automobile in the United Kingdom—created strong demand for road construction in the 1950s.

The company, which listed on the London Stock Exchange in 1963, extended its construction interests into the civil engineering sector during the 1960s. By the early 1970s, however, Amey caught the attention of acquisitive Consolidated Gold Fields. The mining conglomerate had decided to expand its operations into the quarrying of aggregates for the construction industry, as part of an overall diversification program. In 1973, Consolidated Gold Fields acquired Amey, then added the company to two other recently added quarrying operations, Greenfields and Amalgamated Roadstone. The three operations were combined into a single entity, Amey Roadstone Construction, or ARC.

Under Consolidated Gold Fields, ARC became a modernized company that helped to transform the quarrying industry in the United Kingdom. The company also began to expand geographically, adding operations in continental Europe, as well as in Africa and other parts of the world. ARC also continued to build its civil engineering and construction operations, notably through its Amey construction wing. The company’s civil engineering and construction work led it into other public service areas, such as railway maintenance and services to various military installations. Emphasizing its expanding construction business, the company took on a new name, ARC Construction, in 1986.

By the end of the 1980s, Consolidated Gold Fields itself had come into the focus of one of the United Kingdom’s largest conglomerates, Hanson PLC, which bought the mining giant, including ARC Construction, in 1969. Several months after its acquisition of Consolidated Gold Fields, Hanson agreed to spin off the ARC Construction component in a management buyout led by Neil Ashley, Eddie King, and other Amey directors. The management buyout, at a cost of just £6.2 million, was financed by backer Close Securities. The new company, placed as a subsidiary under the newly created Amey Holdings, was renamed Amey Construction Ltd.

Developing Independently: 1990s

Amey’s first years as an independent company were hampered by the deep recession of the early 1990s, and particularly the crisis affecting the United Kingdom’s construction sector in general. Led by Ashley as chairman and King as chief executive, Amey began making acquisitions, including acquiring a mechanical and electrical engineering business in 1990 and taking over the construction contracts, placed under the name Amey Building, from two failed construction companies that same year. Amey was unable to make a breakthrough with its new mechanical and electrical engineering wing, however, and, after posting losses, the unit was discontinued in 1993. Meanwhile, the company’s house building unit, hard hit by the economic downturn, was also struggling.

Yet, Amey remained primarily a road building company—that division, which built roads for the Department of Transport as well as for the Ministry of Defense and also provided road and related construction for the United Kingdom’s civil airports, contributed more than 80 percent of its profits and the largest share of its sales. By the mid-1990s, the company was ranked sixth in the United Kingdom’s road building sector.

By 1994, Amey had recovered from its financial difficulties enough to go public with a listing on the London exchange. While road construction continued to play a prominent role in the company’s operations, especially with government plans to spend as much as £2.3 billion on road construction and maintenance in the mid-1990s, Amey increasingly turned its attention to expanding its facilities management and support services operations, a market it had first entered in 1991. An important moment in Amey’s facilities management and support services operations came when the company won a management contract with the city of Portsmouth in 1995.

Amey continued building up its construction and road work operations in the mid-1990s, including winning resurfacing contracts for Manchester Airport. Yet road building by then accounted for only about one-third of Amey’s total business. Instead, the company’s interest was turning more and more to facilities management and support services. In 1996, the company paid £15 million to acquire majority control of Western Infrastructure Maintenance Company (WIMC), which had been part of the newly privatized British Rail (renamed Railtrack). The purchase was described by Ashley as representing a “quantum leap” in the company’s facilities management and maintenance operations, and raised the portion of the company’s profits generated by the sector to more than 75 percent of its total profits. Soon after that, the WIMC acquisition, Amey, together with partner Sir Robert Me Alpine, was awarded a £175 million contract to build the Croydon Tramlink, a 28-kilometer light rail network. By the end of 1996, the company’s sales had grown past £312 million.

Brian Staples took over as chief executive after Edward King retired in 1997. Staples now stepped up Amey’s transformation into a facilities management and support services group, boasting a war chest of some £100 million that the company intended to put toward acquisitions. The company’s repositioning had been achieved just as the United Kingdom’s support services sector promised to enter a new era of growth. In the mid-1990s, the British government had announced the creation of a so-called Private Finance Initiative (PFI) as it sought to turn over the management and maintenance of many formerly government-run services to the private sector. The new program was expected to provide a strong increase to the numbers of contracts turned over to non-government businesses, and Amey had placed itself in line as a strong contender for PFI contracts.

Meanwhile, the company continued adding to its road and rail operations, joining the Autolink Concessionaires consortium, with partners Sir Robert McAlpine and Taylor Woodrow Construction, to win a £370 million contract to build a highway linking Carlisle and Glasgow in 1997. The company also won a £40 million management and maintenance contract for roads spanning Buckinghamshire, Berkshire, Essex, Hertfordshire, and Oxfordshire. Then, at the beginning of 1998, Amey and French partner SECO/DEF won a rail replacement contract worth £140 million.

Amey sold off its homebuilding division in September 1998, to Try Homes for £4.8 million, as it turned its focus toward facilities management. The company also began petitioning the London stock exchange to change its listing from the construction and homebuilding category to the support services sector. Toward this aim, the company restructured these operations, placing its civil engineering and construction operations into a single division.

Company Perspectives:

Amey seeks to be a leading provider of outsourced business support services, operating in all segments of the economy, adding value to its many quality clients in the process. Through the delivery of continuous improvement, supported by innovation, technology and investment, Amey will strive to exceed expectations in order to achieve lasting customer satisfaction. By striving for excellence, Amey will provide a challenging and rewarding environment for its employees, which will be the catalyst for the continuing growth of shareholder value.

Support Services Company for the 21st Century

The year 1999 was to provide the breakthrough for Amey’s conversion into a support services leader. At the beginning of that year, the company won a £65 million contract from Centrica to provide business support services, including security, catering, and postal services, on a national scale. Next, Amey, along with partners Kvaerner and Hyder, won the renovation and maintenance contract for the Ministry of Defence’s headquarters at Whitehall. Buoyed by this activity, Amey launched a hostile takeover offer for Servisair, in an attempt to enter the airport ground support services market. Yet Servisair rejected Amey’s £82 million offer and agreed to be acquired by Penauille Poly services, based in France. Thwarted, Amey began to look about for another large-scale acquisition target, announcing its intention to spend up to £90 million in order to complete its shift away from the construction industry.

After contenting itself with the modest £1.1 million acquisition of Enviresponse, a provider of environmental disaster recovery services, the company finally found a large-sized match. In July 1999 the company agreed to pay £86 million to acquire Comax, a specialist in high-security support services. That company had been created in 1995 as the internal support services division of the British government’s Defence Evaluation Research Agency (Dera). The division was then spun off in a management buyout, backed by Cinven, in 1997. The Comax acquisition, described by CEO Staples as “a complete step change in Amey’s development,” ultimately proved enough to tip the balance and led to the company’s reclassification from the underrated construction industry to the more dynamically growing facilities management and support services sector.

Following the Comax purchase, Amey shifted its construction division, which was renamed Amey Asset Services, away from winning outside contracts toward providing construction services for the company’s new core operations. An example of the new role was seen when the company won a £155 million contract to construct and modernize facilities for the Northern Birmingham Mental Health Trust in 2000. Upon completion, the project was to be turned over to Amey’s support services division, which would then initiate a 35-year facilities management contract.

Meanwhile, Amey continued to reap the rewards of PFI contracts, including winning, as part of the 3ED consortium (with Halifax and Miller Group), a £1.9 billion contract to modernize and manage 29 secondary schools in Glasgow. Another important contract came that same year when Amey was signed on to design, build, and manage a new facility for the Immigration Service. At the end of 2000, Amey expanded its facilities management operation, entering Ireland through the purchase of a 33 percent stake in Irish Facilities Management. Closing out the year, the company, as part of a consortium including infrastructure specialist Jarvis Plc was awarded the contract to redevelop a large part of the London Underground. The company’s one-third stake in the consortium gave it a prime share of the expected annual value of £400 million to £500 million over some 30 years.

At the beginning of 2001, Amey restructured its operations to reflect its new focus. The company now divided up into four primary divisions: Public Sector Services, Private Sector Services, Transportation Services, and Technology Services. The company continued to show itself an aggressive participant in the race to outsourced government contracts—by the end of 2001, the company claimed to have its bid in on more than 144 contracts, including 38 PFI projects. Amey was clearly on the right road to building a position as a leader in the U.K. support services sector.

Principal Subsidiaries

Amey Building Limited; Amey Business Services Limited; Amey Construction Limited; Amey Fleet Services Limited; Amey Group Services Limited; Amey Highways Limited; Amey Information Services Limited; Amey Projects Limited; Amey Properties Limited; Amey Vectra Limited; Amey Ventures Limited; IT Counsel Limited.

Principal Divisions

Public Sector Services; Private Sector Services; Transportation Services; Technology Services.

Principal Competitors

AMEC PLC; Balfour Beatty PLC; Bechtel PLC; Bouygues SA; Colas SA; Fluor SA; Jarvis PLC; Sodexho SA; Tarmac PLC; WS Atkins PLC.

Key Dates:

1921:

Ron Amey begins quarrying and gravel business in Thames Valley.

1948:

Company forms Amey Asphalt, dedicated to road construction.

1963:

Company goes public on London Stock Exchange.

1973:

Amey is acquired by Consolidated Gold Fields, which merges it with Greenfields and Roadstone Construction to form Amey Roadstone Construction (ARC).

1989:

Consolidated Gold Fields is acquired by Hanson Plc; ARC is spun off in a management buyout as Amey Construction.

1991:

Amey makes first move into facilities management sector.

1994:

Amey goes public as Amey Pic.

1999:

Amey acquires Comax, a specialist in high-security support services; this acquisition enables Amey to change its stock exchange listing to the support services sector.

Further Reading

Batchelor, Charles, “Amey in Focus on PFI Schemes,” Financial Times, September 11, 2001.

Moreton, Philippa, “Amey Unveils Record Orders, 2000 Profits Up,” Reuters, March 20, 2001.

Potter, Ben, ed., “Amey Is Still Building, but Turns Its Attention to Maintenance,” Daily Telegraph, March 24, 1999.

Ridge, Mian, “Amey HI up, Sees Booming Growth Ahead,” Reuters, September 11, 2001.

Thackray, Rachelle, “Amey Builds on PFI with £155m Mental Health Trust Deal,” Independent, August 17, 2000, p. 17.

Yates, Andrew, “Amey Amasses £100m War Chest for Acquisition Spree,” Independent, September 4, 1997, p. 22.

Young, Andrew, “Amey Boosts Support Services with Buy,” Reuters, July 1, 1999.

—M.L. Cohen