Amec Foster Wheeler plc Annual report and accounts 2016 Connected excellence Welcome to Amec Foster Wheeler Strategic report: overview Amec Foster Wheeler serves major corporations 01 Performance highlights and government bodies in the oil, gas and 02 Amec Foster Wheeler at a glance 06 Our business model chemicals, mining, power and process and 08 Chairman’s statement 09 Chief Executive Officer’s statement environment and infrastructure markets. Customers choose us because we help Strategic report: strategic review 14 Our markets maximise the value of their assets by reducing 16 Our strategy 22 Key performance indicators the capital cost of construction and the lifetime 24 Key contract wins and order book cost of operation and maintenance. We do 25 People 28 Principal risks and uncertainties this through concept studies and design work, 33 Sustainability value engineering, consistent project delivery, Strategic report: performance review developing innovative solutions and adopting 34 Financial review technology to enhance efficiency. Governance We are a leading player in our markets and have 46 Chairman’s governance overview 47 Leadership and effectiveness a strong reputation for delivering and maintaining 47 Our board of directors some of the world’s largest and most complex 50 Amec Foster Wheeler governance structure 51 Board role and responsibilities projects. 52 Board composition 53 The Chairman and Chief Executive Officer 53 Senior Independent Director In March 2017, the board recommended 54 Non-executive Directors an all share offer for the entire issued and 55 Board meetings 56 Conflicts of interest to be issued share capital of the Company 57 Professional development 58 Evaluation by John Wood Group. The board believes 59 Nominations committee that a combination with John Wood Group 61 Our Executive committee 63 Management committees will accelerate the delivery of the future value 64 Accountability inherent in the Company. 64 Risk management and internal control systems 65 Audit committee 70 Health, safety, security, environmental and ethics (HSSEE) committee 72 Remuneration 72 Remuneration committee 74 Directors’ remuneration report 89 Engagement 89 Relations with shareholders 90 Directors’ report 93 Responsibility statements of the directors Financials 94 Independent auditor’s report to the members of Amec Foster Wheeler plc 102 Report of independent registered public accounting firm on internal control over financial reporting 103 Report of independent registered public accounting firm 104 Consolidated income statement 105 Consolidated statement of comprehensive income 106 Consolidated balance sheet 107 Consolidated statement of changes in equity 110 Consolidated cash flow statement 112 Notes to the consolidated accounts 167 Company balance sheet 168 Company statement of changes in equity 169 Notes to the company accounts Additional information 176 History and development 177 Risk factors 188 Performance measures 191 Prior year operating results 196 Information for shareholders 197 Other information 210 Cross reference to Form 20-F 212 Related undertakings 222 Five-year record (unaudited) 223 Glossary 224 Forward-looking statements Performance highlights We have made good progress with our wide-ranging review Amec Foster Wheeler delivered resilient trading of our strategy, organisational structure and cost base: results for 2016. Despite continuing weakness X New leaner organisational structure introduced from in some key markets, we benefited from the 1 January 2017, focused on four market-facing business lines diversity of our business, cost saving initiatives X Business line strategies refreshed, to focus on areas and the fall in sterling in the second half. of greatest opportunity X Sustainable net cost reductions of £100m per year identified, with the full run rate reached by 2019 X Progress made in delivering the non-core disposal programme overview report: Strategic 13 March 2017 announcement and offer from John Wood Group The board has recommended an all share offer for the entire issued and to be issued share capital of the Company from John Wood Group, at an exchange ratio of 0.75 John Wood Group shares for each Amec Foster Wheeler share. Further details are available at www.amecfw.com/investors/offer-by-wood-group-plc X The offer from John Wood Group meant that the Company ceased preparation for a rights issue of approximately £500m designed to strengthen the balance sheet. We also announced our intention to suspend future dividends until the Company is generating sustainable free cash flow Governance Revenue1, 2 Adjusted profit 5,455 5,440 332 334 £m before tax1, 2, 3 327 317 £m 4,088 3,974 3,993 254 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 1, 2, 4 Profit/(loss) 254 255 Adjusted diluted EPS 87. 2 before tax1, 2 p 78.6 79.5 £m 155 2012 2013 2014 67.7 2015 2016 Financials 50.4 (235) (542) 2012 2013 2014 2015 2016 Adjusted measures used by the Group, such as adjusted 3 Adjusted profit before tax represents profit before tax before exceptional profit before tax and adjusted diluted EPS, are explained and items, the amortisation and impairment of intangible assets, asbestos- reconciled to the equivalent IFRS measures in the section related costs and interest expense (net of insurance recoveries), and the Group’s share of tax on the results of joint ventures. entitled Performance measures on pages 188 to 190. 4 Adjusted diluted earnings per share represents profit for the year before Notes exceptional items, the amortisation and impairment of intangible assets, 1 Continuing operations. asbestos-related costs and interest expense (net of insurance recoveries), 2 Figures for 2012 have been restated to reflect the reclassification in 2013 and the tax effect of those items, divided by the diluted number of of the UK conventional power business as a discontinued operation and the ordinary shares. adoption of IAS 19 (Revised 2011) ‘Employee Benefits’. Additional information Additional Amec Foster Wheeler Annual report and accounts 2016 01 Amec Foster Wheeler at a glance We offer similar services in each of our markets and many What we do of our capabilities are transferable across markets. Our customers’ operations rely on their assets, We deliver our services around the world through approximately ranging from oil platforms to power plants and 35,000 highly skilled people, including engineers, project managers, consultants and scientists. As a people-based mines. We help them maximise the value of these business, our operating model is low risk and asset light assets throughout their lifecycle. (see pages 6 to 7). Consulting Execution/design Hook-up and Asset support Decommissioning and front end and construction commissioning Providing services and remediation Consulting with Conceptualising Overseeing the and consultancy Helping customers our customers and designing their installation and to operate, maintain to decommission to determine what capital projects. commissioning and enhance assets. assets at the end of they require from of these assets. their economic use. their assets. Well positioned across the life cycle of our customers’ assets Project viability review Greenfield projects Brownfield projects O&M support Late life management Environmental services Amec Foster Wheeler 02 Annual report and accounts 2016 Our structure aligns our organisation with our customers. Our business lines Since 1 January 2017, we have organised our operations into four global market-facing business lines. This structure aligns our organisation with our customers, helping us to meet their needs more effectively and efficiently. Strategic report: overview report: Strategic Oil, Gas & Chemicals Mining Power & Process Environment & The Oil, Gas & Chemicals value We provide mining In renewables, our focus is on Infrastructure chain has three segments: consultancy (including ore delivering customer projects, Our Environment & upstream, which involves resource estimation, mine primarily for local utilities. Infrastructure business exploration and production; planning and feasibility We provide a full-service focuses on environmental midstream, which includes studies), design, and engineering, procurement and consulting, engineering transportation and natural gas project and construction construction solution for wind, design and programme and processing; and downstream, management services to a solar, biomass and biofuels construction management. which is mainly the refining range of mining companies, projects. US solar is our We offer complete solutions and petrochemical industries. primarily in the Americas primary market in Power. to public and private-sector and Africa. We operate in every part of the Within the conventional customers worldwide. project delivery phase of this The Mining business is power market, we work with Our customers benefit value chain, except early cycle intentionally diversified utilities to upgrade and modify from experts with a broad exploration and drilling. and we have developed their existing assets, often understanding of local technical capabilities in a in relation to environmental conditions, coupled with easy The majority of our upstream Governance range of commodities, which or regulatory compliance access to world-renowned activity is currently in differentiate us from our requirements, by providing technical expertise. conventional oil and gas competitors. We have a strong consulting and engineering fields, in particular offshore oil By positioning ourselves position in the