Final Results

RNS Number : 7600N

Atkins (WS) PLC

17 June 2010

 

Results for the year ended 31 March 2010

 

"Strong results in a tough economic environment demonstrate resilience of our strategy."

 

Design and engineering consultancy group WS Atkins plc (Atkins) today announced its preliminary results for the year ended 31 March 2010.

 

RESULTS SUMMARY

	Notes	2010	2009	change
Continuing operations
Revenue	1	£1,387.9m	£1,487.2m	-6.7%
Operating profit		£113.0m	£103.1m	+9.6%
Operating margin		8.1%	6.9%	+1.2pp
Normalised profit before taxation	2	£96.5m	£100.2m	-3.7%
Profit before taxation		£96.6m	£102.7m	-5.9%
Profit for the year		£77.3m	£84.2m	-8.2%
Normalised diluted EPS	3	77.8p	82.3p	-5.5%
Diluted EPS		77.9p	84.8p	-8.1%
Dividend relating to the year		27.5p	26.0p	+5.8%
Continuing and discontinuing operations (total)
Profit for the year		£102.3m	£84.2m	+21.5%
Normalised diluted EPS	3	77.8p	82.3p	-5.5%
Diluted EPS		103.1p	84.8p	+21.6%
Cash and cash flows
Net funds		£302.5m	£234.2m	+29.2%
Cash flow from operating activities		£126.5m	£125.5m	+0.8%
People
Average staff numbers for the year	4,5	16,421	17,988	-8.7%
Staff numbers at 31 March	4,5	15,601	18,017	-13.4%

 

SUMMARY

 

·; Operating profit up 9.6% and operating margin up to 8.1%.

 

·; Restructuring costs of £16m taken above the line.

 

·; Continuing strong operating cash flow of £126.5m and net funds of £302.5m.

 

·; Normalised diluted EPS down 5.5%.

 

·; Good work in hand representing 54% of budgeted revenue.

 

·; Recommended final dividend of 18.25p, making the total dividend 27.5p, up 5.8%.

 

Notes:

1. Revenue excludes the Group's share of revenue from Joint Ventures.

2. Normalised profit before taxation is defined as profit before taxation less exceptional items and any profits or losses from disposals. This is considered to be a more representative measure of underlying trading.

3. Normalised diluted earnings per share (EPS) is based on normalised profit after tax and allows for the dilutive effect of share options.

4. Staff numbers are measured on a full-time equivalent basis, including agency staff.

5. Staff numbers at 31 March 2009 include approximately 600 under notice of redundancy.

 

"We are pleased to report that Atkins had another good year. These strong results, delivered in a tough economic environment, demonstrate the resilience of our strategy. 

 

Our diversified exposure to end markets gives us added resilience to market fluctuations. However, the uncertainty of the impact of UK public spending cuts continues and we are prepared for a period of tighter Government spending. The future for the built environment will bring more complex engineering challenges as clients put greater emphasis on planning and design disciplines to achieve maximum value for their infrastructure programmes. This is what Atkins does well.

 

The Group has good levels of work in hand and a strong balance sheet and we are well positioned for when growth returns."

 

 

Allan Cook Keith Clarke

Chairman Chief executive

 

 

Enquiries

 

Atkins
Keith Clarke, Chief executive	+ 44 (0) 1372 726140
Sara Lipscombe, Group communications director
Smithfield
Alex Simmons	+44 (0) 20 7360 4900

 

 

Notes to editors

 

1. Atkins

Atkins (www.atkinsglobal.com) plans, designs and enables the delivery of complex infrastructure and buildings for clients in the public and private sectors across the world. Atkins is the largest engineering consultancy in the UK and the world's eleventh largest international design firm (sources: New Civil Engineer Consultants File, 2010; Engineering News Record, 2008).

2. Attachments

Attached to this press release are the overview of the year, extracts from the business review, the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and notes to the preliminary financial information for the year.

3. Analyst Presentation

A presentation for analysts will be held today at JPMorgan Cazenove, 20 Moorgate, London EC2R 6DA at 8.30am. Dial-in details are available from Smithfield for those wishing to join the presentation by conference call. A webcast of the presentation will subsequently be available via the Company's website, www.atkinsglobal.com.

 

4. Cautionary Statement

 

This press release and preliminary financial information (press release) have only been prepared for the shareholders of the Company, as a whole, and their sole purpose and use is to assist shareholders to exercise their governance rights. In particular, this press release has not been audited or otherwise independently verified. The Company and its directors and employees are not responsible for any other purpose or use, or to any other person, in relation to this press release.

 

This press release contains indications of likely future developments and other forward looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group's results, strategy and prospects. Forward looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ. No obligation is assumed to update any forward looking statements, whether as a result of new information, future events or otherwise.

 

OVERVIEW OF THE YEAR

 

We are pleased to report that Atkins has had another good year. Group operating profit from continuing operations increased 9.6% to £113.0m and the Group's operating margin improved to 8.1% from 6.9%. In the year ended 31 March 2010 the Group's revenue reduced 6.7% to £1,387.9m, on average staff numbers down some 8.7%. 

 

Despite a strong operating profit performance, the Group's significantly increased pension costs and lower returns on its cash and other financial assets resulted in a reduction in profit before tax.

 

Profit before tax was £96.6m and included £0.1m of profit on disposal of a Joint Venture. This gives a normalised profit before tax of £96.5m (2009: £100.2m). There was also a pension curtailment gain of £2.6m reported in the first half which, if excluded, gives a more comparable profit before tax of £93.9m.

 

In addition, there was a profit from discontinued operations of £25m relating to the release of a provision following the expiry of a letter of credit in respect of the Metronet enterprise.

 

Normalised diluted EPS reduced by 4.5p per share to 77.8p, a decrease of 5.5%, reflecting the decrease in normalised profit before taxation.

 

The Group's liquidity remains strong, driven by a good cash performance in the second half of the year, and we ended the year with net funds of £302.5m.

 

People

 

The business relies fully on the ability of our employees to satisfy our clients' requirements.

 

In responding to market demand we have reduced our staff numbers by approximately 13% to 15,601 at the year-end. Of these, approximately 600 people were already under notice at the start of the year, giving an in-year reduction of 1,816 staff from an adjusted opening headcount of approximately 17,400, a reduction of 10%. We have successfully redeployed more than 500 people into different roles across the Group and continue to recruit to fill specialist vacancies in the growth areas of our business. 

 

We continue to invest in the training and development of our people and, in particular, in the development of a suite of carbon calculation tools to help our staff and clients deliver lower carbon projects.

 

We would like to thank all our employees throughout the Group for their commitment and efforts during these testing economic times.

 

Dividend

 

The Board is recommending a final dividend of 18.25p, taking the total dividend for the year to 27.5p (2009: 26.0p), an increase of 5.8%. If approved, the dividend will be paid on 24 September 2010 to ordinary shareholders on the register on 20 August 2010.

 

Outlook

 

Our diversified exposure to end markets gives us added resilience to market fluctuations. However, the uncertainty of the impact of UK public spending cuts continues and we are prepared for a period of tighter Government spending. 

 

The future for the built environment will bring more complex engineering challenges as clients put greater emphasis on planning and design disciplines to achieve maximum value for their infrastructure programmes. This is what Atkins does well.

 

The Group has good levels of work in hand and a strong balance sheet and we are well positioned for when growth returns.

 

BUSINESS REVIEW

 

Design and Engineering Solutions

 

Key performance indicators	2010	2009	change
Financial metrics
Revenue	£390.3m	£435.0m	-10.3%
Operating profit	£31.3m	£31.6m	-0.9%
Operating margin	8.0%	7.3%	+0.7pp
Work in hand	45%	43%	+2pp
People
Staff numbers at 31 March	4,400	5,167	-14.8%
Average staff numbers	4,664	5,133	-9.1%

 

Overall, the Design and Engineering Solutions segment performed well despite difficult market conditions for some of our businesses.

 

We improved margins to 8.0% (2009: 7.3%) on reduced revenue of £390.3m (2009: £435.0m), with operating profit broadly flat at £31.3m (2009: £31.6m). 

 

This segment contains a mix of businesses that are at different stages of the economic cycle.

 

Our water business was restructured in the early part of the year in anticipation of reduced activity levels. The regulatory Asset Management Programme (AMP) cycle in the water sector delayed the release of work to the market and the usual hiatus experienced with this cycle was longer and deeper than in previous transitions. Our work on flood mitigation for the Environment Agency continued, with wins on the South West Coastal Strategy Packages delivering three large flood risk management and habitat creation strategies covering Poole Harbour, the Exe Estuary and the Taw and Torridge Estuaries. Our land remediation business remains busy with the Olympic Park and an equal-sized site in South Wales for St Modwen Properties plc.

 

Our UK building design business was also restructured in the early part of the year in anticipation of reduced activity levels, but then stabilised with wins in the education and healthcare sectors, most notably the New Campus Glasgow and NHS Tayside Murray Royal Hospital. We have limited exposure to the private developer market, which remains difficult.

 

We continued our successful relationship with the Olympic Delivery Authority and the London Organising Committee of the Olympic Games as the official engineering design services provider for the London 2012 Games.

 

Our businesses focusing on high-technology industries such as defence, aerospace and communications have delivered solid performances. We continue to support UK Government departments and industry on key strategic programmes, which we expect to continue in the future. In our aerospace business we remain a key supplier to Airbus and have expanded our footprint in Europe with key wins in Germany on the A350 and A380 programmes. Further success has also been achieved in the UK with key roles on the A320 Sharklet programme and expansion into landing gear systems. Communications and security continue to be strong market segments in which our skills and capabilities remain in high demand. 

 

Our energy business has performed well, assisted by the imperative to decarbonise the UK's generation capacity via nuclear and offshore wind. Our work on existing nuclear generation and decommissioning has been augmented by a number of commissions in the nuclear new-build arena for utilities and for the Department of Energy and Climate Change. Additionally, we have recently announced success in winning a major contract on the International Thermonuclear Experimental Reactor (ITER) programme being built in the south of France. ITER is the next step in a global research and development programme to harness nuclear fusion to generate electricity. The €150m contract was won by a multidisciplinary Atkins team, working in a Joint Venture alongside three other companies. As architect engineer the Joint Venture is providing full multidisciplinary design services for the €3bn project. 

 

Our experience in the offshore oil and gas industry has allowed us to take a significant position in the marine renewables sector, which is a key component of the UK Government's low-carbon strategy. We have won major design assignments on the Gabbard and Lincolnshire offshore wind farm developments. We have built significant capability in this sector and our multidisciplinary approach combining our experience in offshore structures, power transmission and distribution makes us well placed for this expanding market. Our oil and gas activity expanded during a year that has seen significant oil price fluctuation. Our core skills in high technology are well suited to meet the industry's requirements to extend the life of ageing assets and to move increasingly into areas of deepwater operation. 

 

We continue to win projects internationally, with master planning studies in countries such as Saudi Arabia and Azerbaijan and internationally funded water resource projects in Europe and Africa.

 

Outlook

 

The overall outlook for Design and Engineering Solutions is good and with work in hand of 45% of budgeted revenue for 2010/11 (2009: 43%) we are in a slightly stronger position than at the same time last year.

 

Following restructuring our water and UK building design businesses are now well placed with a good order book. In our water business, we have successfully secured a stronger position on frameworks for the next regulatory period, which commenced on 1 April 2010. Our infrastructure design business has a healthy workload and is focusing on successful delivery of the London 2012 Games programme.

 

Our defence and security business is well positioned for enabling cost-effective change and procurement programmes, in an increasingly cost-conscious market. In aerospace, we are expanding our breadth of service and geographical footprint, which will provide a good platform for future growth.

 

We continue to invest in resources to meet increasing demand for our services in the energy sector, especially in nuclear but also in oil and gas and renewables.

 

 

Highways and Transportation

 

Key performance indicators	2010	2009	change
Financial metrics
Revenue	£300.4m	£308.2m	-2.5%
Operating profit	£21.4m	£19.9m	+7.5%
Operating margin	7.1%	6.5%	0.6pp
Work in hand	69%	62%	7pp
People
Staff numbers at 31 March	2,931	3,075	-4.7%
Average staff numbers	2,975	3,016	-1.4%

 

Our Highways and Transportation segment performed well in the year, benefiting from the UK Government's financial stimulus and our M25 contract.

 

Operating profit increased 7.5% to £21.4m (2009: £19.9m) and margins increased to 7.1% (2009: 6.5%), principally due to the strong demand for our higher-margin consultancy activities and the benefits of our continued drive for greater efficiencies. In an increasingly competitive market and with average staff numbers marginally lower than last year, revenue was down 2.5% year on year.

 

We won over £1bn of work in the year to 31 March 2010, including a five-year contract with Somerset County Council (from 1 April 2010), a three-year extension by Gloucestershire County Council (from 1 April 2011) and our share of the turnover from the M25 widening DBFO contract that reached financial close in May 2009.

 

Our highway services business, which represents around 57% of this segment's revenue, is engaged in maintaining and improving highway networks on behalf of the UK Highways Agency and local authorities. We have significant work in hand for the next few years with none of our existing major contracts due to expire before mid 2013.

 

In April 2010we commenced delivery as the highways' maintenance, design and construction provider for Oxfordshire County Council. This ten-year contract, worth around £350m, with potential extensions of up to ten years, involves policy and strategy advice and support, design services, network management, construction of improvement schemes and cyclic, reactive and planned maintenance.

 

Mobilisation during the second half of the year for the new five-year Somerset network management contract went well. This contract builds on nearly 14 years of continuous service to the county. Our contract with Gloucestershire County Council has been extended by three years to 2014 and we continue our work with Cambridgeshire County Council and for the Highways Agency in the Area 6 Managing Agent Contractor (MAC) contract.

 

Our transport solutions design business, which delivers technical consultancy and R&D services as well as all aspects of highway infrastructure design, performed very well on a broad portfolio of projects for a range of clients.

 

Design work on the M74 project in Scotland is now nearly complete. On the M25 contract, we are providing the design expertise for the 40-mile widening programme and work will be completed in time for the London 2012 Games. The related 30-year operation and maintenance Joint Venture contract with Balfour Beatty (52.5%) and Egis (15%), commenced successfully in September 2009. Atkins (32.5%) will provide services in network management, asset inspection, traffic management, tunnel operations, incident management, and routine and winter maintenance for the entire M25, covering a distance of 250 miles.

 

Our intelligent transport systems (ITS) business has had another good year, growing to a business of 350 people as the market for technology-based solutions develops in response to traffic management, capacity and sustainability challenges. There was very strong demand from the Highways Agency for our services, on projects such as managed motorway schemes to improve journey time reliability through hard shoulder running and managing the technology delivery and upgrade programme on the A14 corridor traffic management scheme. We continue to develop and implement technology infrastructure for the network management and traveller information systems which we operate in the national traffic control rooms in Scotland and Wales. Our contract with Essex County Council, through which we develop and operate its ITS assets, is now in its tenth year.

 

Our transport planning business provides a wide range of consultancy services, including advice on strategy, policy, management and forecasting, as well as business case and investment appraisals for infrastructure investment. Although there was a marked decrease in work from the private sector, work in the development planning and other markets remained solid with wins on public sector projects such as the Elephant and Castle Surface Interchange Feasibility Study, Oxford Circus interchange and work on the UK Government's housing growth agenda. A further key success in the year was winning more than 20% of the studies in the Government's 'Delivering a Sustainable Transport System' programme, which will identify and provide evidence to support long-term strategic transport investment priorities.

 

Outlook

 

We continue to win work at acceptable rates in an increasingly competitive market. We are prepared for UK Government and local authority spending cuts, having addressed our cost base and secured significant future work. Additionally, some local authority clients are actively discussing extensions to our consultancy commissions and Birmingham City Council has recently agreed to continue working with us until May 2012.

 

The uncertain market outlook is partially offset by our recent contract wins, and work in hand at 31 March 2010 was 69% of budgeted revenue for 2010/11 (2009: 62%).

 

 

Rail

 

Key performance indicators	2010	2009	change
Financial metrics
Revenue	£185.7m	£196.1m	-5.3%
Operating profit	£16.8m	£17.0m	-1.2%
Operating margin	9.0%	8.7%	+0.3pp
Work in hand	53%	61%	-8pp
People
Staff numbers at 31 March	1,420	1,624	-12.6%
Average staff numbers	1,483	1,635	-9.3%

 

The Rail segment had a good performance this year.

 

This segment recorded an improved margin of 9.0%, benefiting from the phasing on a number of major projects, and an operating profit of £16.8m (2009: £17.0m). Revenue was down 5.3% on last year, reflecting delays in projects coming to market in the early part of the year and the demobilisation of our structures examination contract for bridge inspection.

 

Our signalling business remains busy and good progress was made in year with our major re-signalling projects for Network Rail, which account for more than 40% of our revenue.

 

We successfully completed the first phase of the Newport re-signalling programme at the end of the calendar year and we have made significant progress on the installation for the next commissioning phase. Work on the North London Line project, which forms part of the Olympic 2012 transport plan, is progressing well. These two projects have combined contract revenue of over £100m.

 

The other part of this business, which focuses on rail-related design and consultancy services, has also performed well. Our multidisciplinary design work for Chiltern Railways' enhancement project continues and we are now working on the signalling and detailed design for the main contractor. The design for the complex Farringdon Station for Thameslink is nearly complete and we are well positioned for further Thameslink opportunities. We also have ongoing work for Transport for London and London Underground.

 

Work is progressing well with our partner Arup on the design for 22 kilometres of twin-bored tunnel for Crossrail, one of the largest and most important elements of this significant project. We are also undertaking design work for Tottenham Court Road and Custom House stations.

 

In Scotland we continue to work closely with Network Rail on the Edinburgh to Glasgow electrification and follow-on work packages.

 

Outlook

 

Our signalling business has a leading market position and there is a large programme of improvements needed to the rail network to meet medium-term passenger demand. These are currently planned under the Office of the Rail Regulator's rail budget for Control Period 4 (2009 to 2014), though this is likely to come under some further scrutiny by the current Government.

 

With reduced work in hand of 53% at 31 March 2010 (2009: 61%), the outlook for this segment is challenging.

 

 

Middle East

 

	2010	2009	change
Financial metrics
Revenue	£136.6m	£186.0m	-26.6%
Operating profit	£14.0m	£17.3m	-19.1%
Operating margin	10.2%	9.3%	+0.9pp
Work in hand	57%	53%	+4pp
People
Staff numbers at 31 March	1,867	2,824	-33.9%
Average staff numbers	2,154	2,823	-23.7%

 

Our Middle East business continues to successfully navigate a difficult economic climate. Confidence and liquidity is beginning to return to the region with the strongest opportunities relating to public sector infrastructure.

 

Compared to last year we have extended our order book, which stood at 57% of budgeted revenue for 2010/11 at 31 March 2010 (2009: 53%). During the year, we reduced our headcount in the region in anticipation of lower activity and we ended the year with 1,867 staff (2009: 2,824). Our continued focus on margins is reflected in the improvement in the year to 10.2% (2009: 9.3%).

 

The profile of our debt in the Middle East, in common with the market as a whole, has continued to deteriorate. We have maintained the Group policy of providing for all debt greater than 180 days, or sooner if there is a risk of non-recovery.

 

We have a well-established presence in six primary locations in the region, centred on Abu Dhabi and Dubai, and we continue to expand our footprint in the region both in terms of geographical location and the breadth of sectors we serve. We are investing in and securing work in defence, energy, planning and management consultancy, while at the same time adding to our existing infrastructure, building design, planning and oil and gas businesses. 

 

Our work on the Red Line of the Dubai Metro was fundamental to its high-profile and successful opening on 9 September 2009. The Dubai Metro is the world's longest automated driverless metro system, with more than 25 overground stations, four underground stations and over 47 kilometres of viaducts. Our work on the Dubai Metro Green Line continues, along with other rail-related work such as the Makkah Metro project in Saudi Arabia, which is progressing well.

 

Outlook

 

Market sentiment is improving and the action taken to reduce headcount to match forward workload and increase efficiency positions us well for future growth, although the timing of work starting on projects secured remains a little unpredictable. Our planning and consultancy business is seeing increasing opportunities with clients seeking greater clarity and certainty about their business cases before investment.

 

 

China and Europe

 

	2010	2009	change
Financial metrics
Revenue	£134.1m	£117.2m	+14.4%
Operating profit	£6.1m	£4.9m	+24.5%
Operating margin	4.5%	4.2%	+0.3pp
Work in hand	57%	54%	+3pp
People
Staff numbers at 31 March	1,774	1,741	+1.9%
Average staff numbers	1,780	1,675	+6.3%

 

 

This segment consists of our design and engineering consultancy businesses in Hong Kong and mainland China and five countries across Europe: Denmark, Ireland, Poland, Portugal and Sweden.

 

The portfolio of businesses in China and Europe has increased revenue by 14.4% and improved margins year on year, with average staff numbers up 6.3%.

 

China

 

	2010	2009	change
Financial metrics
Revenue	£64.0m	£46.1m	+38.8%
Operating profit	£3.7m	£2.7m	+37.0%
Operating margin	5.8%	5.9%	-0.1pp
Work in hand	64%	71%	-7pp
People
Staff numbers at 31 March	997	933	+6.9%
Average staff numbers	995	890	+11.8%

 

Our China business continues to expand as a consequence of success in the buoyant Hong Kong rail infrastructure market.

 

We employed nearly 1,000 staff in the region at the year-end (2009: 933). Revenue increased almost 40% to £64.0m with an increase in operating profit to £3.7m (2009: £2.7m) and a slight decline in operating margin year on year.

 

In Hong Kong we continue to support the expansion of the rail network through the delivery of a wide range of multidisciplinary services to the Mass Transit Rail Corporation on the preliminary and detailed design of various sections of the West Island Line, Express Rail Link, South Island Line and Shatin to Central Link. These design contracts include stations, tunnels and viaducts. The most recent assignment secured is for the detailed design of the Shatin to Central Link's Hung Hom Station and associated tunnels.

 

Our urban planning and architectural business operates out of three primary locations in mainland China, in Beijing, Shanghai and Shenzhen. This business is performing in line with our expectations in a very competitive but buoyant property market, and we have focused our effort over this last year on improving the quality of our offering in this market.

 

Outlook

 

The prospects for our business in China remain good with the Hong Kong Government committed to annual capital works expenditure in the next few years at double the rate of recent years. We expect our Hong Kong business to remain busy, serving clients in the highways, geotechnical, water and rail sectors, and we will continue to expand our technical offering in other areas. The property market in mainland China remains strong.

 

Work in hand for the Chinese business is 64% of budgeted 2010/11 revenue (2009: 71%).

 

Europe

 

	2010	2009	change
Financial metrics
Revenue	£70.1m	£71.1m	-1.4%
Operating profit	£2.4m	£2.2m	+9.1%
Operating margin	3.4%	3.1%	+0.3pp
Work in hand	51%	42%	+9pp
People
Staff numbers at 31 March	777	808	-3.8%
Average staff numbers	785	785	0%

 

Our European portfolio performed in line with expectations, maintaining revenue and improving margins by 0.3pp to 3.4% in difficult economic conditions.

 

As in prior years, performance has been mixed. Our Scandinavian, Polish and Portuguese businesses performed well, while Ireland, which represents less than 15% of the portfolio, has yet to see signs of an upturn.

 

Our Danish business, which employs 359 staff (2009: 335), continues to expand and secured a significant re-signalling design contract extending over 15 years for the Danish European Rail Traffic Management System (ERTMS). This is the first time an advanced system like this has been fitted to an entire country's strategic rail network and it will set the standard for Europe. We also continue to provide consultancy on the transportation package for the Copenhagen Metro Circle Line.

 

Our Swedish business is growing and had increased to 142 staff by the year-end (2009: 130 staff).

 

Our Polish business has extended its workload in the roads sector with its appointment as independent checking engineer and site supervisor for the A2 toll motorway, which extends over 100 kilometres with some 80 bridges.

 

Difficult economic conditions in Ireland have resulted in projects being delayed and in increasingly competitive pricing. We have continued to reduce the size of our business to match demand, and had 101 staff members (2009: 155 staff members) at the end of the year.

 

Outlook

 

Europe has secured 51% of budgeted 2010/11 revenue (2009: 42%) and the outlook overall remains good, although we expect parts of our European business to continue to face challenging market conditions.

 

Our involvement on ERTMS positions us well for further ERTMS work across the UK and Europe over the coming years.

 

 

Management and Project Services

 

Key performance indicators	2010	2009	change
Financial metrics
Revenue	£202.8m	£230.0m	-11.8%
Operating profit	£15.9m	£18.9m	-15.9%
Operating margin	7.8%	8.2%	-0.4pp
Work in hand	44%	44%	-
People
Staff numbers at 31 March	1,991	2,294	-13.2%
Average staff numbers	2,094	2,405	-12.9%

 

Management and Project Services had a good year, despite revenue being down by over 11% on the prior year as we adjusted staff numbers in our Faithful+Gould business to take account of prospective activity levels. 

 

Despite the reduction in revenue our continuing focus on maintaining margins meant that these were close to last year at 7.8% (2009: 8.2%) for the segment as a whole.

 

Our Faithful+Gould business, which accounts for the majority of the segment's revenue, provides project management and cost consultancy services in a broad range of market sectors. Our diverse client base and geographic spread has provided resilience in a difficult and highly competitive market over the last year. This has adversely affected volumes in parts of our business and we took early action to reduce headcount by approximately 300 staff across the world.

 

Faithful+Gould has secured a number of significant projects in the last year, including public sector frameworks such as our appointment in the UK to the Government's Buying Solutions Project Management and Design Services framework, and in the USA where we secured a position on a five-year General Services Administration national project management framework with the US Government.

 

We continue to address the financial services market with a recently secured framework for Lloyds Banking Group providing project management and quantity surveying services, building on existing contracts with RBS and Barclays. We also continue to work in education on the Building Schools for the Future programme and in the utilities market for a number of water companies.

 

Elsewhere, our Asia Pacific business continues to develop, underpinned by work for global pharmaceutical companies investing in both new and existing facilities in the region.

 

Our Management Consultants business, which had a very good year, continues to plan, design and deliver programmes that create value through efficiency gains from the implementation of ICT-enabled business change.

 

Our markets in the UK and internationally cover a diverse base of local government and public sector clients for whom we deliver efficiency improvements through business change. In the capital-intensive private sector we deliver business change, feasibility studies, due diligence and project development plans and methodologies.

 

Outlook

 

We are pleased to have maintained our work in hand for the coming year at 44% of budgeted revenue and to have extended our total future work with a number of longer term contracts.

 

Overall, the outlook for this segment is stable.

 

 

Asset Management

 

Key performance indicators	2010	2009	change
Financial metrics
Revenue	£56.0m	£47.6m	+17.6%
Operating (loss)/profit	£5.0m	£(6.8)m	+173.5%
Operating margin	8.9%	(14.3)%	23.2pp
Profit on disposal of JV	-	£2.5m	-
Work in hand	73%	99%	-26pp
People
Staff numbers at 31 March	562	671	-16.2%
Average staff numbers	613	682	-10.1%

 

Results for the Asset Management segment for 2009/10 were favourably impacted by the exit from one of our long-term legacy PFI maintenance contracts.

 

The segment's operating margin increased to 8.9% (2009: -14.3%) principally as a result of the release of residual provisions held on the previously reported poor performing PFI maintenance contract and there was a consequential reduction in headcount following the termination of this contract.

 

The remainder of the contracts in our managing contractor business are performing in line with expectations.

 

In our managing agent business we concluded our contract for Barclays Bank during the year, although we continue to win work in the financial services sector. In particular we have secured a five-year contract to deliver helpdesk and managing agent services to Lloyds Banking Group.

 

Outlook

 

We remain well placed in both the public and private sector to continue to help clients lower their cost base. Our work in hand at 31 March 2010 represented 73% of budgeted revenue for 2010/11 (2009: 99%). The reduction reflects the aforementioned contract termination.

 

 

Financial performance

 

Net finance cost

Net finance cost was £14.6m (2009: net cost of £3.1m). The year on year increase was attributable to a £9.6m increase in the net finance cost on post-employment benefit liabilities and a significant interest-rate driven reduction in the interest receivable on short-term deposits. The net finance cost is expected to stabilise in 2010/11 and remain similar to that reported in 2009/10.

 

Taxation

The Group's income tax expense for the year is £19.3m (2009:£18.5m), giving an effective tax rate of 20.0% (2009: 18.0%). The Group's normalised effective tax rate is 19.8% (2009: 18.5%). The rate is lower than the UK rate (28%) due to continued benefits from research and development tax credits and the proportion of overseas profits earned in jurisdictions with a lower tax rate. The Group expects the effective tax rate to continue to benefit from similar tax credits and territorial profile of profits going forward.

 

Earnings per share (EPS)

Basic EPS from continuing operations was 79.5p (2009: 86.1p). Normalised diluted EPS, which we consider to be a more representative measure of underlying trading and relates to continuing operations, was 77.8p (2009: 82.3p), a decrease of 5.5%.

 

Pensions

 

Funding

The latest actuarial valuation of the defined benefit Atkins Pension Plan (the Plan) carried out as at 1 April 2007 indicated that the Plan had an actuarial deficit of approximately £215m. Accelerated contributions of £32m were made during the year and the Group has agreed to contribute a further £32m per year for the next four years. The next actuarial valuation will take place as at 1 April 2010 and is likely to be completed in late 2010 or early 2011.

 

Charges

The Group accounts for pension costs under IAS 19, Employee benefits. The total charge to the income statement in respect of defined benefit schemes reduced to £13.9m (2009: £14.8m), comprising total service cost of £5.5m (2009: £8.9m); net finance cost of £15.1m (2009: £5.9m) and curtailment and settlement gains of £2.6m and £4.1m respectively. The charge relating to defined contribution schemes increased to £33.5m (2009: £28.2m).

 

IAS 19 valuation and accounting treatment

The Group assesses pension scheme funding with reference to actuarial valuations, but for reporting purposes uses IAS 19. Under IAS 19, the Group recognised a much-increased retirement benefit liability of £440.0m at 31 March 2010 (2009: £298.4m) despite a strong performance of the scheme assets. The actuarial loss recognised through the Group's statement of comprehensive income amounted to £119.7m (2009: £88.5m).

 

The assumptions used in the IAS 19 valuation are detailed in note 29 to the Financial Statements.

 

Cash

Net funds at 31 March 2010 were £302.5m (2009: £234.2m) made up as follows:

 

	2010	2009
	£m	£m
Cash and cash equivalents	260.3	209.7
Loan notes receivable	21.2	12.9
Financial assets at fair value through profit or loss	32.4	28.7
Borrowings due within one year	(0.7)	(2.8)
Borrowings due after one year	-	(0.6)
Finance leases	(10.7)	(13.7)
Net funds	302.5	234.2

 

Cash generated from continuing operations was £126.5m (2009: £125.5m), representing 112% of operating profit, and can be summarised as follows:

 

	2010	2009
	£m	£m
EBITDA	134.0	136.5
Outflow relating to pensions	(36.3)	(40.6)
Movement in working capital	29.6	10.9
Movement in long-term payables	1.9	-
Movement in provisions	(5.9)	9.2
Other non-cash items	3.2	9.5
	126.5	125.5

 

Operating cash flow remained strong as we continued to optimise the cash position on our contracts. Proactive working capital management resulted in a net working capital inflow of £29.6m, which was achieved despite a lengthening of debtor days in the Middle East.

 

The movement in provisions is mainly due to the one-off release of residual provisions within our Asset Management business.

 

Net tax paid amounted to £18.0m (2009: £12.8m) which includes payments of £3.5m (2009: £0.4m) to Metronet for consortium relief.

 

Net capital expenditure in the year, including the purchase of computer software licences, amounted to £10.8m (2009: £27.6m). The reduction was due to less spending and better utilisation of assets already in use.

 

No shares were bought back during the year in respect of the share buyback programme (2009: £12.3m).

 

Capital structure

As at 31 March 2010, the Group had a shareholders' deficit of £84.9m (2009: £43.5m) and the Company had shareholders' funds of £136.7m (2009: £108.8m).

 

The Company had 104.5m fully paid ordinary shares in issue at 31 March 2010 (2009: 104.5m). Further details are provided in note 31 to the Financial Statements.

 

Keith Clarke Heath Drewett

Chief executive Group finance director

 

16 June 2010

 

 

Consolidated income statement for the year ended 31 March 2010

 

		2010	2009
	Notes	£m	£m
Revenue (Group and share of Joint Ventures)		1,418.0	1,532.4
Revenue	2	1,387.9	1,487.2
Cost of sales		(854.6)	(941.9)
Gross profit		533.3	545.3
Administrative expenses		(420.3)	(442.2)
Operating profit	2	113.0	103.1
Profit on disposal of Joint Venture	4	0.1	2.5
Share of post-tax (loss)/profit from Joint Ventures	5	(1.9)	0.2
Profit before interest and tax		111.2	105.8
Finance income	6	3.8	6.7
Finance cost	6	(18.4)	(9.8)
Net finance cost	6	(14.6)	(3.1)
Profit before taxation		96.6	102.7
Income tax expense	7	(19.3)	(18.5)
Profit for the year from continuing operations		77.3	84.2
Discontinued operations	3	25.0	-
Profit for the year attributable to owners of
the parent		102.3	84.2
Earnings per share
From continuing and discontinued operations (total)
Basic earnings per share	9	105.2p	86.1p
Diluted earnings per share	9	103.1p	84.8p
From continuing operations
Basic earnings per share	9	79.5p	86.1p
Diluted earnings per share	9	77.9p	84.8p

 

Notes 1 to 13 below form part of the preliminary financial information.

 

 

Consolidated statement of comprehensive income for the year ended 31 March 2010

 

			2010	2009
Notes			£m	£m
Profit for the period			102.3	84.2
Other comprehensive income
Actuarial loss on post-employment benefit  liabilities	10		(119.7)	(88.5)
Cash flow hedges			2.5	-
Net differences on exchange			(0.2)	12.4
Other comprehensive income for the period  net of tax			(117.4)	(76.1)
Total comprehensive (expense)/income  attributable to owners of the parent			(15.1)	8.1

 

Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 7c.

 

Notes 1 to 13 below form part of the preliminary financial information.

 

 

Consolidated balance sheet as at 31 March 2010

 

		2010	2009
	Notes	£m	£m
Assets
Non-current assets
Goodwill		62.1	62.3
Other intangible assets		4.7	9.0
Property, plant and equipment		38.9	46.6
Investments in Joint Ventures		1.8	3.9
Deferred income tax assets		149.4	101.6
Derivative financial instruments		0.6	-
Other receivables		21.2	12.9
		278.7	236.3
Current assets
Inventories		0.9	0.3
Trade and other receivables		300.7	353.7
Financial assets at fair value through profit or loss		32.4	28.7
Cash and cash equivalents		260.3	209.7
Derivative financial instruments		1.3	-
		595.6	592.4
Liabilities
Current liabilities
Borrowings		(4.4)	(7.6)
Trade and other payables		(434.3)	(478.7)
Derivative financial instruments		-	(0.8)
Current income tax liabilities		(34.6)	(31.2)
Provisions for other liabilities and charges		(5.6)	(9.9)
		(478.9)	(528.6)
Net current assets		116.7	64.2
Non-current liabilities
Borrowings		(7.0)	(9.5)
Provisions for other liabilities and charges		(17.0)	(17.8)
Post-employment benefit liabilities	10	(450.5)	(311.5)
Derivative financial instruments		-	(0.4)
Other non-current liabilities		(5.8)	(4.8)
		(480.3)	(344.0)
Net liabilities		(84.9)	(43.5)
Capital and reserves
Ordinary shares	11	0.5	0.5
Share premium account		62.4	62.4
Merger reserve		8.9	8.9
Retained loss		(156.7)	(115.3)
Equity shareholders' deficit		(84.9)	(43.5)

 

Notes 1 to 13 below form part of the preliminary financial information.

 

 

Consolidated cash flow statement for the year ended 31 March 2010

 

		2010	2009
	Notes	£m	£m
Cash flows from operating activities
Cash generated from operations	12	126.5	125.5
Interest received		3.4	6.3
Interest paid		(1.1)	(2.2)
Income tax paid		(18.0)	(12.8)
Net cash generated from operating activities		110.8	116.8
Cash flows from investing activities
Distributions received from Joint Ventures		-	1.3
Acquisition of subsidiaries
- consideration		-	(3.5)
- cash acquired		-	1.0
Deferred consideration payments		(0.9)	(0.8)
Loans to Joint Ventures and other related parties		(7.9)	(6.9)
Repayment of Joint Ventures loans		2.1	-
Purchases of property, plant and equipment		(8.4)	(18.2)
Proceeds from disposals of:
- property, plant and equipment		1.1	1.1
- investments in subsidiaries		-	0.2
- investments in Joint Ventures		0.1	2.5
(Purchases)/disposals of financial assets		(3.7)	1.0
Purchases of intangible assets		(3.5)	(10.5)
Net cash used in investing activities		(21.1)	(32.8)
Cash flows from financing activities
Repayment of short-term loans		(2.7)	(4.3)
Purchase of own shares by Employee Benefit Trusts		(7.2)	-
Finance lease principal payments		(4.9)	(4.5)
Share buyback		-	(12.3)
Equity dividends paid to shareholders	8	(25.7)	(24.7)
Net cash used in financing activities		(40.5)	(45.8)
Net increase/(decrease) in cash, cash equivalents
and bank overdrafts		49.2	38.2
Cash, cash equivalents and bank overdrafts at beginning of year		209.7	154.5
Exchange movements		1.4	17.0
Cash, cash equivalents and bank overdrafts at
end of year	13	260.3	209.7

 

Notes 1 to 13 below form part of the preliminary financial information.

 

 

Consolidated statement of changes in equity as at 31 March 2010

 

				Retained
	Share	Share	Merger	(loss) /
	capital	premium	reserve	earnings	Total
	£m	£m	£m	£m	£m
Balance at 1 April 2008	0.5	62.4	8.9	(95.2)	(23.4)
Total comprehensive income for the year	-	-	-	8.1	8.1
Dividends	-	-	-	(24.7)	(24.7)
Share-based payments	-	-	-	8.0	8.0
Share buyback	-	-	-	(11.5)	(11.5)
Balance at 31 March 2009	0.5	62.4	8.9	(115.3)	(43.5)
Total comprehensive income for the year	-	-	-	(15.1)	(15.1)
Dividends	-	-	-	(25.7)	(25.7)
Share-based payments	-	-	-	6.6	6.6
Employee Benefit Trusts	-	-	-	(7.2)	(7.2)
Balance at 31 March 2010	0.5	62.4	8.9	(156.7)	(84.9)

 

Notes 1 to 13 below form part of the preliminary financial information.

 

 

Notes to the preliminary financial information for the year ended 31 March 2010

 

1. Basis of preparation and accounting policies

The financial information attached has been extracted from the audited financial statements for the year ended 31 March 2010, and has been prepared in accordance with international financial reporting standards (IFRS) as adopted by the EU and international financial reporting interpretations committee (IFRIC) interpretations issued and effective at the time of preparing those financial statements. The financial information for the years ended 31 March 2010 and 31 March 2009 does not constitute summary financial information or statutory financial information as defined in Section 434 and Section 428 of the Companies Act 2006 for those years. The annual report and financial statements for the year ended 31 March 2010 were approved by the Board of Directors on 16 June 2010, together with this announcement, but have not yet been delivered to the Registrar of Companies. The auditor's report on the financial statements for both years was unqualified and did not contain a statement under either Section 498 (2) or 498 (3) of the Companies Act 2006. The financial statements for the year ended 31 March 2009 have been delivered to the Registrar.

 

The principal accounting policies adopted under IFRS and applied in the preparation of the financial statements are available on the Group's website, www.atkinsglobal.com.

 

 

2. Segmental reporting

 

The chief operating decision-maker has been identified as the chief executive and the Group finance director. The chief executive and the Group finance director review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

 

The chief executive and the Group finance director assess the performance of the operating segments based on operating profit before interest and tax. Information provided to the chief executive and the Group finance director is measured in a manner consistent with that in the financial statements.

 

Revenue and results

						Share of
						post-tax
						profit/(loss)
		Inter-		Operating		from
	Total	segment		profit /	Operating	Joint	Total
	revenue	revenue	Revenue	(loss)	margin	Ventures	assets
2010	£m	£m	£m	£m	%	£m	£m
Design and Engineering  Solutions	442.5	(52.2)	390.3	31.3	8.0	-	90.0
Highways and Transportation	319.6	(19.2)	300.4	21.4	7.1	0.2	61.0
Rail	190.7	(5.0)	185.7	16.8	9.0	-	40.1
Middle East	150.0	(13.4)	136.6	14.0	10.2	-	149.1
China and Europe	143.2	(9.1)	134.1	6.1	4.5	-	96.9
Management and Project  Services	217.6	(14.8)	202.8	15.9	7.8	(0.1)	63.7
Asset Management	58.0	(2.0)	56.0	5.0	8.9	-	4.4
Total for segments	1,521.6	(115.7)	1,405.9	110.5	7.9	0.1	505.2
Group items:
Joint Ventures reported above	(18.0)	-	(18.0)	(0.1)
Unallocated central items	-	-	-	2.6		(2.0)
Unallocated assets							369.1
Total for Group	1,503.6	(115.7)	1,387.9	113.0	8.1	(1.9)	874.3

 

Total segment revenue excludes the share of Joint Venture revenue earned from centrally managed Joint Ventures of £12.1m (2009: £12.3m).

 

						Share of
						post-tax
						profit/(loss)
		Inter-		Operating		from
	Total	segment		profit /	Operating	Joint	Total
	revenue	revenue	Revenue	(loss)	margin	Ventures	assets
2009	£m	£m	£m	£m	%	£m	£m
Design and Engineering  Solutions	451.9	(16.9)	435.0	31.6	7.3	0.1	122.0
Highways and Transportation	328.0	(19.8)	308.2	19.9	6.5	(0.4)	60.3
Rail	210.2	(14.1)	196.1	17.0	8.7	-	57.1
Middle East	206.0	(20.0)	186.0	17.3	9.3	-	191.6
China and Europe	123.9	(6.7)	117.2	4.9	4.2	-	81.9
Management and Project  Services	241.0	(11.0)	230.0	18.9	8.2	-	72.8
Asset Management	50.5	(2.9)	47.6	(6.8)	(14.3)	-	(1.8)
Total for segments	1,611.5	(91.4)	1,520.1	102.8	6.8	(0.3)	583.9
Group items:
Joint Ventures reported above	(32.9)	-	(32.9)	0.3
Unallocated central items	-	-	-	-		0.5
Unallocated assets							244.8
Total for Group	1,578.6	(91.4)	1,487.2	103.1	6.9	0.2	828.7

 

 

3. Discontinued operations

 

Following the expiry during the year of a letter of credit issued in respect of the Metronet Enterprise (which went into PPP Administration on 18 July 2007) the Group has released a related provision and a one-off, non-cash credit of £25.0m has been reflected in the Group's full-year income statement. There is no related tax charge.

 

 

4. Profit on disposal of Joint Venture

 

On 5 March 2010 the Group disposed of its holding in Transaction Systems Limited generating a profit on disposal of £0.1m. In the prior year, on 1 April 2008 the Group disposed of its holding in Modern Housing Solutions (Prime) Limited generating a profit on disposal of £2.5m.

 

 

5. Joint Ventures

 

Share of post-tax (loss)/profit from Joint Ventures

 

	2010	2009
	£m	£m
Revenue	30.1	45.2
Operating expenditure	(30.8)	(44.7)
Operating (loss)/profit	(0.7)	0.5
Finance cost	(6.2)	(5.4)
Finance income	4.8	5.1
(Loss)/profit before taxation	(2.1)	0.2
Income tax credit	0.2	-
Share of post-tax (loss)/profit from Joint Ventures	(1.9)	0.2

 

 

6. Net finance cost

 

		2010	2009
		£m	£m
Hire purchase and finance leases		0.8	1.0
Unwinding of discount		1.1	1.0
Net finance cost on post-employment benefits (note 10)		16.2	6.6
Other finance costs		0.3	1.2
Finance cost		18.4	9.8
Interest receivable on short-term deposits		(0.7)	(2.9)
Income from held at fair value financial assets		(0.9)	(2.2)
Unwinding of discount		(0.4)	(0.4)
Other finance income		(1.8)	(1.2)
Finance income		(3.8)	(6.7)
Net finance cost		14.6	3.1

 

 

7. Income tax expense

 

a) Analysis of charge in the year

	2010	2009
	£m	£m
Current income tax
- current year	20.0	16.8
- adjustment in respect of prior year	(0.2)	0.5
Deferred income tax	(0.5)	1.2
Income tax on profit per income statement	19.3	18.5
Adjust for:
- Joint Venture taxation	(0.2)	-
Normalised income tax expense	19.1	18.5
Profit before tax per income statement	96.6	102.7
Adjust for:
- Joint Venture taxation	(0.2)	-
- profit on disposal of Joint Venture	(0.1)	(2.5)
Normalised profit before income tax	96.3	100.2
Effective income tax rate	20.0%	18.0%
Normalised effective income tax rate	19.8%	18.5%

 

b) Factors affecting income tax expense

 

The normalised income tax expense for the year is lower (2009: lower) than the standard rate of corporation tax in the UK of 28% (2009: 28%). The differences are explained below:

 

	2010	2009
	%	%
UK statutory income tax rate	28.0	28.0
Increase/(decrease) resulting from:
Expenses not deductible for tax purposes	-	0.7
Adjustment in respect of overseas tax rates	(6.4)	(4.2)
Effect of share-based payments	(0.2)	2.7
Tax on Joint Ventures	0.4	(0.1)
R&D tax credit	(2.4)	(2.4)
Consortium relief	-	(6.9)
Other	0.4	0.7
Normalised effective income tax rate	19.8	18.5

 

c) Income tax on components of other comprehensive income

 

	Post		2010
	Employment	Cash
	benefit liability	flow hedges	Total
	£m	£m	£m
At 1 April	35.4	-	35.4
Deferred income tax	46.6	-	46.6
Current income tax	-	(1.0)	(1.0)
At 31 March	82.0	(1.0)	81.0

 

	Post		2009
	Employment	Cash
	benefit liability	flow hedges	Total
At 1 April	1.1	-	4.0
Deferred income tax	34.3	-	33.2
Current income tax	-	-	0.4
At 31 March	35.4	-	37.6

 

 

8. Dividends

	2010	2009	2010	2009
	pence	pence	£m	£m
Final dividend paid for the year ended 31 March 2009 (2008)	17.25p	16.50p	16.7	16.1
Interim dividend paid for the year ended 31 March 2010 (2009)	9.25p	8.75p	9.0	8.6
Dividends recognised in the year	26.50p	25.25p	25.7	24.7
Interim dividend paid for the year ended 31 March 2010 (2009)	9.25p	8.75p	9.0	8.6
Final dividend proposed for the year ended 31 March 2010 (2009)	18.25p	17.25p	17.8	16.9
Dividends relating to the year	27.50p	26.00p	26.8	25.5

 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in this preliminary financial information.

 

 

9. Earnings per share (EPS)

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year excluding shares held by the Employee Benefit Trusts (EBTs), which have not unconditionally vested in the employees, and shares held in treasury.

 

Diluted earnings per share is the basic earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the number of options outstanding during the year. The options relate to discretionary employee share plans.

 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

 

	2010		2009
	number ('000)		number ('000)
Number of shares
Weighted average number of shares used in basic and normalised basic EPS	97,269		97,790
Effect of dilutive securities - share options	1,964		1,516
Weighted average number of shares used in diluted and normalised diluted EPS	99,233		99,306
	£m		£m
Earnings - continuing and discontinued operations
Profit for the year attributable to owners of the parent	102.3		84.2
Earnings - continuing operations
Profit for the year attributable to owners of the parent	77.3		84.2
Profit on disposal of Joint Venture	(0.1)		(2.5)
Normalised earnings	77.2		81.7
	pence	pence
From continuing and discontinued operations
Basic earnings per share	105.2	86.1
Diluted earnings per share	103.1	84.8
From continuing operations
Basic earnings per share	79.5	86.1
Diluted earnings per share	77.9	84.8
Normalised basic earnings per share	79.4	83.5
Normalised diluted earnings per share	77.8	82.3

 

Normalised diluted EPS is considered to be a more representative measure of underlying trading.

 

 

10. Post-employment benefit liabilities

 

The Group's post-employment benefit liabilities are analysed below: 

 

	2010	2009
	£m	£m
Retirement benefit liabilities	440.0	298.4
Other post-employment liabilities	10.5	13.1
	450.5	311.5

 

(a) Retirement benefit liabilities

 

The Group operates both defined benefit and defined contribution pension schemes. The two main defined benefit schemes are the Atkins Pension Plan and the Railways Pension Scheme, both of which are funded final salary schemes. The assets of both schemes are held in separate trustee- administered funds. Other pension schemes include the Atkins McCarthy Pension Plan in the Republic of Ireland, which is a final salary funded defined benefit scheme, and a range of defined contribution schemes or equivalent.

 

On 1 September 2009 the terms of the Railways Pension Scheme were amended to offer two options regarding future benefits. The options were to receive future benefits linked to final salary in exchange for higher contributions or to receive future benefits linked to salary as at 1 September 2009 with future increases capped at inflation. Following consultation 83 members selected to cap their future benefits which has resulted in a curtailment gain of £2.6m in the year. The remaining members retained benefits linked to final salary.

 

During the year as a result of a TUPE transfer 49 members transferred out of the Atkins section of the Railways Pension Scheme. The bulk of the assets were transferred in January 2010 and the liabilities in respect of transferring members were valued at 31 December 2009. The bulk transfer resulted in a settlement gain of £4.1m. The Company also made a top-up payment to the receiving section to ensure full funding for protected members which amounted to £1.8m. The payment was made directly to the receiving section and so does not appear in the disclosures for the Atkins section of the Railways Pension Scheme. The net gain recognised in the income statement is £2.3m.

 

In the previous year, on 31 March 2009, the defined benefit section of the Atkins McCarthy pension scheme was closed to future accrual of benefits for members who do not enjoy a statutory or contractual right to a final salary pension. These members transferred to the Personal Retirement Savings Accounts - Ireland (PRSA - Irish Life) scheme with effect from 1 April 2009.

 

The Atkins Pension Plan was closed to future accrual of benefits on 30 September 2007 and all members were transferred to a defined contribution section for future service where it was clear they did not enjoy a statutory or contractual right to a final salary pension. Although the service accrual under the defined benefit sections ceased for these members, the link to final salary remains whilst employed by Atkins Limited (unless opting out or retiring if sooner).

 

The defined benefit sections of all pension schemes are closed to new entrants, who are now offered membership of the defined contribution section.

 

The main assumptions used for the IAS 19 valuation of the retirement benefit liabilities for the Atkins Pension Plan and the Railways Pension Scheme are listed in the table below.

 

	2010	2009
Price inflation	3.70%	3.00%
Rate of increase of pensions in payment:
Limited Price Indexation	3.70%	3.00%
Limited Price Indexation to 2.5%	2.50%	2.50%
Fixed	5.00%	5.00%
Rate of increase in salaries	5.20%	4.50%
Rate of increase for deferred pensioners	3.70%	3.00%
Discount rate	5.50%	6.30%
Expected rate of return on plan assets	6.50%	6.60%
Expected rate of social security increases	3.70%	3.00%
Longevity at age 65 for current pensioners
Men	22.4 years	22.3 years
Women	24.8 years	24.7 years
Longevity at age 65 for future pensioners (current age 45)
Men	24.3 years	24.2 years
Women	26.7 years	26.6 years

 

The actuarial tables used to calculate the retirement benefit liabilities for the Atkins Pension Plan were the 2000 series standard tables, with medium cohort improvements and a minimum of 1% improvement per annum, based on year of use application. The Railways Pension Scheme results have been adjusted on an approximate basis to be based on the same mortality tables.

 

The components of the pension cost are as follows:

 

Cost of sales	2010  £m	2009 £m
Current service cost	5.5	8.9
Curtailment gain	(2.6)	-
Settlement gain (net)	(2.3)	-
Total service cost	0.6	8.9
Finance (income)/cost
Finance cost	62.3	65.6
Expected return on plan assets	(47.2)	(59.7)
Net finance cost	15.1	5.9
Total charge to income statement for defined benefit schemes	15.7	14.8
Charge for defined contribution schemes	33.5	28.2
Total charge to income statement	49.2	43.0
Statement of comprehensive income
Gain/(loss) on pension scheme assets	125.2	(194.2)
Changes in assumptions	(291.5)	71.4
Actuarial loss	(166.3)	(122.8)
Deferred tax credited to equity	46.6	34.3
Actuarial loss (net of deferred tax)	(119.7)	(88.5)

 

The expected return on plan assets is based on market expectation at the beginning of the year for returns over the entire life of the benefit obligation.

 

	2010  £m	2009  £m
Defined benefit obligation	(1,322.7)	(1,003.4)
Fair value of plan assets	882.7	705.0
Retirement benefit liabilities	(440.0)	(298.4)

 

Movements in the retirement benefit liabilities are as follows:
	2010  £m	2009  £m
At beginning of year	(298.4)	(213.1)
Service cost	(5.5)	(8.9)
Net finance cost	(15.1)	(5.9)
Curtailment gain	2.6	-
Settlement gain	4.1	-
Contributions	38.5	52.5
Actuarial loss	(166.3)	(122.8)
Difference on exchange	0.1	(0.2)
At end of year	(440.0)	(298.4)

 

The Group expects employer contributions to be paid during the financial year to 31 March 2011 to be circa £36.9m, of which £32.0m is in relation to the funding of the actuarial deficit, and employee contributions paid to be circa £2.1m. Expected benefit payments made directly by the Group to pensioners in the financial year to 31 March 2011 are £nil.

 

The approximate effect on scheme liabilities from changes in the main assumptions used to value the liabilities are as follows:

 

	Change in	Effect on plan liabilities
	assumption	Atkins Pension	Railways Pension
		Plan	Scheme
Discount rate	increase/decrease 0.5%	decrease/increase 10.0%	decrease/increase 9.0%
Inflation	increase/decrease 0.5%	increase/decrease 8.0%	increase/decrease 9.0%
Real rate of increase in salaries	increase/decrease 0.5%	increase/decrease 2.0%	increase/decrease 3.0%
Longevity	increase 1 year	increase 3.0%	increase 2.0%

 

(b) Other post-employment benefit liabilities

 

The Group operates unfunded gratuity schemes within certain of its non-UK businesses. Members of the schemes are entitled to receive a cash gratuity on leaving the business which is dependent on their length of employment and final salary. Valuation of the gratuity obligation is carried out in line with the principles of IAS 19, Employee benefits.

 

	2010	2009
	£m	£m
Other post-employment obligations at beginning of year	13.1	6.2
Service cost	(0.1)	4.0
Interest cost	1.1	0.7
Benefit payments	(3.2)	(1.0)
Difference on exchange	(0.4)	3.2
Other post-employment obligations at end of year	10.5	13.1

 

 

11. Ordinary shares

 

	2010  £m	2009  £m
Authorised ordinary shares of 0.5p each
At 1 April	0.8	0.8
Increase in year	0.1	-
At 31 March	0.9	0.8
Issued, allotted and fully paid ordinary shares of 0.5p each
At 1 April	0.5	0.5
At 31 March	0.5	0.5

 

At the Annual General Meeting (AGM) held on Wednesday 9 September 2009 a shareholder resolution was passed by which the authorised share capital of the Company was increased by 30,000,000 ordinary shares of 0.5 pence each. The authorised share capital at 31 March 2010 was therefore 180,000,000 ordinary shares of 0.5 pence each (31 March 2009: 150,000,000). The number issued, allotted and fully paid up shares at 31 March 2010 is 104,451,799 (31 March 2009: 104,451,799).

 

Also at the 2009 AGM, shareholder authority was obtained for the Company to purchase up to a maximum of 10,011,000 of its own ordinary shares (representing approximately 10% of the issued share capital of the Company on 16 June 2009) for a period ending on the earlier of the next AGM or 9 March 2011, provided that certain conditions (relating to the purchase price) are met. The Notice of Meeting for the AGM to be held at 16:30 on Thursday 9 September 2010 proposes that shareholders approve a resolution updating and renewing this authority. Shares in the Company may also be purchased by Atkins' Employee Benefit Trusts.

 

As at the date of this report there were 4,341,000 ordinary shares of 0.5p each (nominal value £21,705) held as treasury shares. No shares were purchased during the year ended 31 March 2010 (2009: 1,123,000 at a cost of £11.3m excluding fees and stamp duty). The 4,341,000 treasury shares, which represent approximately 4.2% of the total (2009: 4.2%) of the called-up share capital as at the date of this report, have not been cancelled and represent a deduction from shareholders' equity.

 

No further shares have been purchased between 31 March 2010 and the date of this preliminary financial information.

 

 

12. Cash generated from continuing operations

 

	2010	2009
	£m	£m
Profit for the year	77.3	84.2
Adjustments for:
Income tax	19.3	18.5
Finance income	(3.8)	(6.7)
Finance cost	18.4	9.8
Share of post-tax profit/(loss) from Joint Ventures	1.9	(0.2)
Other non-cash costs	0.1	-
Depreciation charges	15.3	20.7
Profit on disposal of Joint Venture	(0.1)	(2.5)
Amortisation charges	7.5	12.7
Release of deferred income	(0.2)	(0.1)
Share-based payment charge	6.8	8.9
Pensions settlement and curtailment gain	(6.7)	-
Loss on disposal of property, plant and equipment	1.4	0.7
Movement in provisions	(5.9)	9.2
Movement in working capital	29.6	10.9
Movement in long term payables	1.9	-
Movement in post-employment benefits	(36.3)	(40.6)
Cash generated from continuing operations	126.5	125.5

 

 

13. Analysis of net funds

 

	31 March  2009  £m	Cash  flow  £m	Other  non-cash  changes  £m	Exchange movement £m	31 March 2010  £m
Cash and cash equivalents	209.7	49.2	-	1.4	260.3
Loan notes receivable	12.9	7.9	0.4	-	21.2
Financial assets at fair value
through profit or loss	28.7	3.7	-	-	32.4
Borrowings due within one year	(2.8)	2.7	(0.6)	-	(0.7)
Borrowings due after one year	(0.6)	-	0.6	-	-
Finance leases	(13.7)	4.9	(1.9)	-	(10.7)
Net funds	234.2	68.4	(1.5)	1.4	302.5

 

 

General Information

 

WS Atkins plc is a public limited company incorporated and domiciled in England with company number 1885586. The Company is listed on the London Stock Exchange.

 

Copies of this preliminary financial information are available from the registered office: Woodcote Grove, Ashley Road, Epsom, Surrey KT18 5BW, England and may be viewed on the Atkins website www.atkinsglobal.com.

This information is provided by RNS

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