Half Yearly Report

Half year financial report for the six months ended 30 September 2014

Good results, despite currency headwinds, and a strong performance in the Middle East and Energy.

Design, engineering and project management consultancy WS Atkins plc (Atkins or the Group) today announces its preliminary results for the six months ended 30 September 2014.

FINANCIAL SUMMARY

Highlights

Notes

Commenting on the results, Uwe Krueger, chief executive officer, said:

"These are good half year results, despite currency headwinds, which demonstrate continued progress with our strategy. Of particular note is the strong performance of our Middle East region and our Energy business, which has recently completed two acquisitions in North America. The improvement in the Group's underlying operating margin reflects our continued focus on operational excellence, supported by the sale of a number of lower margin, non-core businesses as part of our portfolio optimisation. The Group's financial position remains strong, with our continued focus on cash generation across the business generating net funds at the end of September of around £155m. We have entered the second half with good work in hand, providing us with confidence for our outlook for the full year, which remains unchanged."

Enquiries

Notes to editors

1. Atkins

Atkins (www.atkinsglobal.com) is one of the world's leading design, engineering and project management consultancies*, employing some 17,900 people across the UK, North America, Middle East, Asia Pacific and Europe. Our people's breadth and depth of expertise and drive to ask why has allowed us to plan, design and enable some of the world's most complex and time critical projects.

*15th largest global design firm (Engineering News-Record 2014) and the third largest multidisciplinary consultancy in Europe (Svensk Teknik och Design 2013).

2. Attachments

Attached to this announcement are: the overview of the period, business review, finance review, statement of directors' responsibilities, the unaudited: consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity, notes to the condensed consolidated interim financial information and the independent auditor's review report.

3. Analyst Presentation

A presentation for analysts will be held at 8.30am today at The Lincoln Centre, 18 Lincolns Inn Fields, London, WC2A 3ED. Dial-in details are available from Smithfield for those wishing to join the presentation by conference call.

A live webcast of the presentation will be available via the Company's website, www.atkinsglobal.com.

4. Cautionary Statement

This announcement has been prepared for the shareholders of the Company as a whole and its sole purpose and use is to assist shareholders to exercise their governance rights. 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 announcement and their responsibility to shareholders shall be limited to that which is imposed by statute.

This announcement 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 materially from those currently expected. No obligation is assumed to update any forward looking statements, whether as a result of new information, future events or otherwise.

Half year financial report for the six months ended 30 September 2014

OVERVIEW

Results

The Group has delivered good results for the six months to 30 September 2014, reporting underlying operating profit of £53.0m (2013: £50.7m), up 4.5% year on year. This profit improvement was delivered against currency headwinds of £2.7m in the period. Further progress has been made on portfolio optimisation, with the sale of our Polish business in September. In early September we acquired Nuclear Safety Associates, Inc. (NSA), a 130 people engineering and technical services firm based in Charlotte, North Carolina. This was followed shortly after the half year by the acquisition of Houston Offshore Engineering, LLC (HOE), a leading oil and gas offshore engineering business of 150 staff based in Houston, Texas.

Revenue for the six months to 30 September 2014 was £831.4m (2013: £915.4m). The year on year reduction in revenue reflects a combination of the sale of our UK highways services business, which contributed £73.7m of revenue in the prior year, together with currency effects of £33.6m.

Staff numbers were 17,898 at the end of September 2014, 2.3% higher than at 31 March 2014 and a 2.8% increase on the same time last year.

Underlying profit before tax of £46.9m (2013: £44.7m) is arrived at after adding back amortisation of intangible assets on acquisition of £1.2m (2013: £1.0m), impairment of goodwill of £2.8m in our aerospace business (2013: £nil), profit on sale of businesses £0.5m (2013 £11.1m) and exceptional external fees in relation to an unsuccessful acquisition pursuit of £4.4m (2013: £nil).

Underlying diluted earnings per share were up 5% to 37.7p (2013: 35.9p).

Our UK and Europe performance has been mixed. Revenue from our continuing businesses was down around 5%, with our aerospace business facing a market downturn in the period and our businesses in Scandinavia and Portugal facing more difficult market conditions. The region's profitability was further impacted by a number of outstanding contract variation negotiations in our UK rail business. In contrast, our highways and transportation and design and engineering businesses continue to benefit from the UK Government's maintained focus on infrastructure investment. In North America, we have seen improved margins following our reorganisation into five market facing business units and the introduction of a new technical professional organisation during the period. Our Middle East business has had a strong first half as we have progressed with the mobilisation and design delivery on a number of large metro projects. In Asia Pacific, where we are experiencing a market slowdown in China, revenue growth has been supported by the acquisition of Confluence last year. Our Energy business has performed well in the first half and we were delighted to welcome nearly 300 new staff with our two recent acquisitions in North America.

The Group's balance sheet remains strong with net funds at 30 September 2014 of £155.3m (2013: £136.1m). The reduction of £33m in net funds since the year end reflects the Group's acquisition of NSA, together with the usual first half working capital outflow.

Strategic progress

We continue tomake progress towards our strategy, which comprises the three pillars of operational excellence, portfolio optimisation and sector and regional focus and we are pleased to report that we are making progress in all three areas.

Operational excellence: Our operational excellence programme is delivering efficiencies in North America and the next phase will see a reorganisation of our UK business as we enhance our client focus, improve efficiency and drive business performance.

Portfolio optimisation: A second aspect of ensuring we are well positioned for the future is an ongoing review of the businesses in our portfolio, continuing to focus the Group on higher growth, higher margin activities. We have continued to make progress in this area in the last six months with the sale of our Polish business, which follows on from the sale of our UK highways services operations and the disposal of the Peter Brown construction management at risk business in the last financial year.

Sector and regional focus: We see some attractive growth prospects in a number of our existing sectors,most notably Energy, where we have continued to invest in both organic growth and acquisitions. As we have noted previously, other sectors on which we place a particular focus will evolve over time. Security remains an attractive sector but it is not yet a business of scale. The challenging environment in aerospace has also seen a reduction of the market and this is unlikely to be a target growth sector going forward. We also seek to expand our market facing offering in geographic areas where we already have a presence, for example in Asia Pacific where we are leveraging our offices in Malaysia and Singapore.

Outlook for the year

The Group has delivered a good first half performance, despite currency headwinds, and the outlook for the full year remains unchanged.

Dividend

The Board has declared an interim dividend of 11.00p per share, representing an increase of 4.8% on last year. The interim dividend will be paid on 9 January 2015 to all shareholders on the register on 5 December 2014.

BUSINESS REVIEW

United Kingdom and Europe

Our UK and Europe business has delivered mixed results in the first half. Revenue in the region has decreased 18.5% to £428.3m, reflecting the sale of our highways services business in 2013, a market downturn in aerospace and difficult trading conditions in Scandinavia and Portugal. We disposed of our Polish business in September 2014 as we progressed further our strategy of portfolio optimisation.

Closing staff numbers fell by 2% to 9,414, primarily as a result of the sale of our highways services and Polish businesses. Excluding the effect of these disposals, year on year headcount was broadly unchanged.

United Kingdom

Our UK business has seen an 18% reduction in revenue and a 6% reduction in average headcount, primarily as a result of the sale of our highways services business in the prior year. Excluding this, revenue in continuing businesses is down 4%, with continued growth in most areas being offset by lower volumes in our water and environment and aerospace businesses. The region's operating margin is slightly ahead of the prior year.

Our highways and transportation business is operating in a buoyant market, where we are well positioned with a strong pipeline of major opportunities. In November the Highways Agency appointed Atkins as one of 10 suppliers for Design and Engineering Services (Lot 1) on its Collaborative Delivery Framework, which has an indicative spend of up to £150m per annum. The framework is for an initial four year term and is extendable by a further two years.

Our rail business remains busy, operating at a high level of staff utilisation, reflecting strong markets in the areas of signalling, electrification and station design. Our financial performance, however, continues to be adversely impacted by a number of outstanding contract variation negotiations.

Our water and environment business experienced slightly subdued performance at the beginning of the period due to a modest reduction in workload for our water industry clients, as expected in the final year of the AMP5 regulatory cycle, combined with a temporary reduction in environmental work in other sectors. In response, we completed a modest right-sizing of the business during the first quarter. We are now seeing a return to higher levels of utilisation and growth, particularly as the water companies start to ramp up work ahead of the start of the AMP6 cycle.

Our design and engineering business serves customers across key segments: education, airports, defence, transportation, energy and mixed use development - with all sectors having strong pipelines of secured workload and future opportunities. In the education sector, the Priority Schools and Academies programmes are gaining momentum and we are well placed to participate in these significant opportunities. Our airports business continues to win and deliver significant programmes of work at both Gatwick and Heathrow.

Our defence, aerospace and communications business has experienced a difficult first half. We remain well positioned in defence and communications, however we have experienced a continued market downturn affecting our aerospace business as our major client, Airbus, has moved from design to production on a number of its programmes. In response, we have reduced the number of staff engaged on aerospace projects over the course of the first half, with the majority of the affected staff successfully redeployed into growth areas of the business, including defence and energy. As a consequence of the change in market conditions we have reviewed and impaired the carrying value of goodwill on the balance sheet of our aerospace business by £2.8m (see note 17), which is not reflected in the underlying profit in the tables above.

Our management consultancy business provides the UK Government and various industry clients with practical capability to run the full lifecycle of technology enabled change programmes. We continue to deliver security work for central Government, as well as supporting Heathrow Airport's IT outsourcing contract in partnership with Capgemini, leveraging our position in aviation. We have established a strong capability in holistic security and this team is delivering a range of high profile projects, including a number of cyber security assignments for multinational private sector clients.

Faithful+Gould had a good first half, with a continued stream of appointments coming through the Scape Asset Management, Surveying and Design Services public sector framework. We are also experiencing increased activity in the London and South East commercial property sector.

As we continue to progress our operational excellence programme, we have recently announced a reorganisation and rationalisation of our UK operations into four market facing business units, which will take full effect from the beginning of the next financial year.

Europe

Revenue of £29.8m has decreased by 20% compared with the prior period, with the region reporting a small operating loss compared with a 4.1% operating margin last year. This deterioration reflects difficult trading conditions in Portugal, combined with an increasingly competitive market in Scandinavia.

Our European business is primarily focused on the rail and highways infrastructure markets in Scandinavia, with smaller operations in Ireland and Portugal. We made further progress on our portfolio optimisation strategy, with the sale of our 77 person business in Poland to Multiconsult AS, a Norwegian multidisciplinary consultancy and design business, which completed in September 2014.

Notwithstanding the current competitive landscape, our core markets in Scandinavia remain well funded, with a strong pipeline of infrastructure projects.

Outlook

We see good opportunities in the UK market as the Government continues to stimulate the economy with its commitment to infrastructure spend.

We have secured work in hand at 30 September 2014 of 85% (2013: 87%) of this year's forecast revenue. With our continued focus on higher margin work within our chosen markets and the high level of current opportunities, we expect to see a return to underlying headcount growth in the second half of the year.

North America

Our North American business has reported a 21% increase in operating profit over the same period last year, at an improved margin of 6.0% (2013: 4.1%). This year's results have benefited from the divestment of Peter Brown, the construction management at risk business, which reported revenue of £6.9m and an operating loss of £3.3m in the first half of last year prior to its sale in August 2013. The year on year revenue reduction reflects the sale of Peter Brown together with currency effects of around £15m.

Headcount has reduced by 50 since the year end, primarily as a consequence of better staff utilisation following the introduction on 1 April 2014 of the new technical professional organisation (TPO), as part of the roll-out of our operational excellence programme in North America.

We have also begun to see improved contract win-rates through the operation of our five newly formed market facing business units, with a more targeted approach to business development and sales.

As we continue to focus on providing long-term, high-value general engineering for new and existing clients, our Department of Transportation (DOT) business has continued its positive performance and has extended its work in hand with wins for Oklahoma DOT, providing construction management support, and Texas DOT, where we continue to support the State of Texas in its 'right of way' programme.

Despite Federal Government funding delays, we were awarded a number of significant contracts, including a Federal Transit Administration framework contract to provide project management services and a contract to provide architectural and engineering services to the National Guard Bureau. We also signed the Federal Emergency Management Agency Risk MAP contract during the period.

Our public and private portfolio has continued to be successful in securing work, with significant awards in the energy, ports and coastal and entertainment sectors.

In aviation, we continue to work on several notable general engineering projects and recently secured a significant win to provide architectural and engineering services for the design of a new terminal at New Orleans Airport.

Following the conclusion of some pre-existing client programmes, our Faithful+Gould business had a quieter start to the year. Despite this, we continue to perform well in the energy sector, with recent extensions to our Ontario Power Generation and BP commissions. We have also been appointed as programme manager on the Houston Airport Terminal B and C renovations and received further work for the US Tennis Association in Florida.

There are ongoing discussions regarding the longstanding and previously reported Department of Justice and Securities and Exchange Commission enquiries relating to potential Foreign Corrupt Practices Act violations by the PBSJ Corporation prior to its acquisition by the Group. We anticipate resolution of this matter before the end of the current financial year.

Outlook

We have entered the second half with our new operating structure fully embedded and this, together with a continued focus on overheads, is expected to deliver an improvement in our operating margin through the second half of the year. Work in hand at 30 September 2014 is strong, at 93% of this year's forecast revenue (2013: 91%).

Middle East

Our Middle East business has performed strongly in the first half of the year, with revenue up 16% at £96.0m (2013: £82.6m) and an improved operating margin of 9.3% (2013: 5.1%). This year on year improvement reflects the strength of our strategic focus on major projects and programmes in rail, infrastructure and property in the UAE, Qatar and the Kingdom of Saudi Arabia (KSA) and prior year reorganisation costs.

Headcount at 2,428 (2013: 1,971) was up 23%, reflecting recent metro wins and project mobilisations.

Good progress has been made on the mobilisation and delivery of our major metro projects, including Riyadh Metro Lines 4, 5 and 6. In July 2014, we were appointed as lead designer on the Doha Metro Gold Line by a consortium of contractors comprising Greece's Aktor, Yapi Merkezi and STFA of Turkey, India's Larsen & Toubro and the local Qatari contractor Al Jaber Engineering.

Our other current rail projects include Dubai Tram in the UAE, and Doha Metro Red Line South and Lusail Light Rail in Qatar. The transport infrastructure market remains buoyant across the region, with further opportunities to work selectively for design and build contractors within our core markets.

In Qatar, our workload is good and we continue to work with the Qatari Government on the delivery of its National Vision 2030. Our key projects include the Central Planning Office, which is making an important contribution to the coordination of Qatar's major transport programmes, and a significant framework contract to upgrade Doha's roads and drainage systems.

In the infrastructure sector in KSA, our support to the Economic Cities Authority on their development of four new cities is progressing well, in partnership with Bechtel. We also have a broad portfolio of infrastructure projects in Abu Dhabi, with key clients including Abu Dhabi and Al Ain Municipality, the Department of Municipal Affairs, the Urban Planning Council and Musanada.

We have a strong property sector workload, with the UAE market in particular continuing to grow in confidence, building further on Dubai's successful bid to host Expo 2020. Our multidisciplinary design expertise is supporting the creation of well planned, people centric developments on behalf of selective clients including Emaar, Meraas and Al Habtoor. In KSA, work on the Prince Sultan Cultural Centre near Jeddah is now at the detailed design stage.

Our Faithful+Gould business in the region had a strong first half, with continued growth across the UAE, KSA and Qatar. Augmented by the addition of the Confluence business in October 2013, we have achieved a number of contract successes in the property sector in particular.

Outlook

We continue to see good major project opportunities in our strategic focus areas. Our order book at 30 September 2014 represented 97% of forecast revenue for the year (2013: 90%), and the overall outlook for our Middle East business remains good.

Asia Pacific

Our Asia Pacific revenue improved to £53.4m (2013: £49.2m), reflecting both the acquisition of Confluence in October 2013 and a good performance in our consultancy business. The region's operating margin reduced to 6.6% (2013: 6.9%), having been impacted by the continued investment in diversification in the region and a slowdown of the market in mainland China.

Headcount rose to 1,566 (2013: 1,341), an increase of 17%, primarily as a result of the Confluence acquisition.

In Hong Kong, we continue to diversify our client portfolio and our pipeline of work in the second half remains healthy and we are well positioned to deliver steady growth. In mainland China, despite the market slowdown, our planning and architecture business continues to remain client focused and is well prepared for the continued growth cycle. Our overseas advisory and programme management services with Chinese contractors continue to gain momentum. As the urbanisation of countries in South East Asia continues, we are progressing well in expanding our geographic footprint, with a clear focus on urban planning, transport infrastructure and property. In India, we continue to provide urban planning with a focus on programme and project management in the infrastructure, buildings and property sectors.

In Hong Kong, following our appointment to project manage the implementation of key elements of the West Kowloon Cultural District earlier this year, the first foundation works for the M+ Museum and Conservation and Storage Facility have recently begun. Our team dedicated to pursuing government projects is also making good progress, winning a major assignment from the Drainage Services Department to upgrade the sewerage facilities in West Kowloon and Tsuen Wan.

In China, the Foreign & Commonwealth Office funded Eco Low-Carbon (ELC) Urban Planning Methodology continues to enhance our reputation as a pioneer for sustainable urbanisation and we have been shortlisted for the Sustainability category of the British Business Awards in China in recognition of our achievements in the area.

Following the memorandum of understanding for global strategic cooperation with China Communications Construction Company Ltd and its subsidiary China Harbour Engineering Company Ltd. (CHEC), signed earlier this year, our work with CHEC on its Colombo Port City development in Sri Lanka has made good progress.

In South East Asia, we recently won a substantial masterplanning project in Jakarta, Indonesia. In Malaysia and Vietnam, we continue to selectively pursue projects in the transport and property sectors. In particular, we are pursuing an increased number of private sector roles by bringing our programme and project management, design, engineering and technical capability together to provide a fully integrated service.

We continue to embed the Confluence acquisition within the Faithful+Gould business and as a consequence have strengthened our multidisciplinary offering to clients.

Outlook

We have secured work in hand at 30 September of 92% (2013: 93%) of our forecast revenue, which gives us confidence as we move into the second half of the year. We continue to monitor carefully the impact of the recent demonstrations in Hong Kong and, while we do not expect any short term impact, we may be affected by a potential hiatus in government contract awards as we move into the new financial year.

Energy

Our Energy business continues to perform well across all sectors. Revenue was down slightly at £81.3m (2013: £83.4m) due to the combined effect of currency headwinds and a higher level of prior year pass through costs. Margins improved to 10.0% (2013: 7.7%), reflecting our focus on reducing overheads and the prior year impact of higher bid and pass through costs.

Headcount rose to 1,616 (2013: 1,420), an increase of 13.8%, and includes the acquisition of NSA (130 staff) in September 2014.

The acquisition of NSA augments our skills base with 130 specialists in nuclear safety and professional security services, and establishes our nuclear footprint in the North American market. In addition, on 1 October 2014, we completed the acquisition of HOE, a leading oil and gas offshore engineering business of 150 staff based in Houston, Texas.

In the UK, we continue to support EDF Energy as a Strategic Supply Chain Partner, helping with the operational management and life extension of its existing nuclear fleet. As reported at the year end, we are part of an equal three way joint venture with Areva and Mace that is preferred bidder on Sellafield's Silos Direct Encapsulation Plant project, the only decommissioning project of its kind in the world.

Momentum is also gathering on nuclear new build programmes around the world, as many countries look to develop nuclear power as part of their long-term strategy for energy security and decarbonisation. We are providing project management and technical services to Emirates Nuclear Energy Corporation in the Middle East on the £20bn Barakah nuclear new build programme, through n.triple.a. We also remain as architect engineer on the €15bn International Thermonuclear Experimental Reactor (ITER) programme in the South of France, as part of the Engage consortium.

Our position in the nuclear new build market in the UK remains strong, as we continue to provide engineering and related technical services for a new generation of nuclear power stations under a framework with Horizon Nuclear Power. The European Commission's recent approval of funding arrangements for the new nuclear power plant at Hinkley Point C bodes well for our support to EDF Energy's new build programme.

We signed recently a memorandum of understanding (MOU) with the China National Nuclear Corporation that will allow us to focus on supporting China's entry into the UK new build market. This MOU represents our first step in building a longer-term relationship with Chinese companies in the energy sector.

We are providing design, engineering, infrastructure and project management services to the €540m capital expenditure programme by Urenco, one of the world's four major uranium enrichment suppliers, providing further evidence that our skills are in high demand across the entire nuclear lifecycle.

As the oil and gas industry continues to look for ways to access more challenging deepwater oil reserves, there is an increasing requirement for our advanced, multidisciplinary engineering skills. Following the recent acquisition of HOE, we now have around 900 oil and gas specialists providing technical excellence from our regional operations worldwide.

Further expanding our expertise and international footprint has helped us to secure long-term framework agreements for both consultancy and design services for major international oil and gas operators such as BP, Shell, Maersk, Chevron, Apache, Nexen and Statoil.

The most recent addition to our long-term framework agreements was a five year contract for the provision of structural integrity management services with Talisman, elevating us to a tier one supplier and building on our previous 10 year multidisciplinary working relationship.

Our international oil and gas operations include a strong pipeline of work in the Middle East, such as our contracts for Abu Dhabi Marine Operating Company supporting the safe life extension of existing critical infrastructure, supporting ENI's portfolio of assets in Australia, and providing engineering services to the Phase 3 expansion project of Singapore's liquefied natural gas (LNG) terminal.

In the UK, our power business continues to maintain a significant portfolio in providing high-end technical support to large-scale power generation and transmission projects with clients such as National Grid, Drax, Eggborough and Energos.

We have begun to expand our power business into international markets through our contract to provide engineering design services to Tennessee Valley Authority's coal and gas plants as part of our teaming arrangement with Merrick & Co in North America. 

The imperative to decarbonise also increases demand for our skills in the renewables sector. We are helping operators and governments to increase capacity from new forms of low carbon generation such as biomass, energy from waste and offshore wind. We also continue to act as technical advisor to the carbon capture and storage commercialisation programme for the UK Government's Department of Energy & Climate Change.

Outlook

The outlook for our Energy business remains very good as the integration of capability from our two recent acquisitions brings access to new international markets both in North America and elsewhere. We continue to seek ways to grow the business organically, while also exploring further acquisition opportunities. Work in hand at 30 September 2014 was 80% (2013: 78%) of forecast revenue for the year.

FINANCE REVIEW

Revenue and operating profit performance for the six months to 30 September 2014 is discussed in more detail in the preceding Business Review.

Results

The Group has delivered good results for the six months to 30 September 2014, reporting underlying operating profit of £53.0m (2013: £50.7m), up 4.5% year on year. Underlying operating profit is arrived at after adding back amortisation of intangible assets on acquisition of £1.2m (2013: £1.0m), impairment of goodwill of £2.8m in our aerospace business (2013: £nil) and exceptional external fees in relation to an unsuccessful acquisition pursuit of £4.4m (2013: £nil).

Pensions

Pension costs

The cost of the Group's defined benefit pension schemes for the six months to 30 September 2014 amounted to £7.9m (2013: £6.9m), of which net finance costs represented £6.8m (2013: £5.9m).

Funding

The Group completed its last triennial valuation as at 31 March 2013 and considers that the contribution rates set at the recent valuation date are sufficient to eliminate the deficit over the agreed period. Under the latest recovery plan the Group agreed to contribute £32m to the Plan for the year ending 31 March 2015, with annual contributions then escalating by 2.5% each year until 31 March 2025.

The Atkins Pension Plan (the Plan) is closed to the future accrual of benefit and all defined benefit members of the Plan were transferred to a defined contribution section for future service where it was clear they did not benefit from a statutory or contractual right to a final salary pension.

IAS 19

The net post-tax retirement benefit liabilities of the Group's pension schemes are estimated at £234.9m (30 September 2013: £263.1m; 31 March 2014: £258.4m). A discount rate of 4.2% has been applied to the net liabilities at 30 September 2014, reduced from 4.5% at the year end.

The key assumptions used in the IAS 19 valuation are detailed in note 19 to the condensed consolidated interim financial information.

Income tax

The Group's income tax expense for the six months ended 30 September 2014 was £7.8m (2013: £7.9m) giving an effective tax rate of 20.0% (2013: 14.4%). The Group's effective underlying tax rate (excluding amortisation of acquired intangibles, impairment of goodwill, exceptional external fees and profits on disposal of businesses) was 19.0% (2013: 20.1%). The underlying effective tax rate is lower than the standard corporation tax rate in the UK of 21% (2013: 23%), due to a combination of the geographic mix of profits and tax rates, movements in provisions and the impact of research and development tax credits.

Earnings per share (EPS)

Diluted EPS decreased 34.4% to 30.9p (2013: 47.1p), which is in line with the Group's profit after tax decrease of 33.5%. Underlying diluted EPS rose 5.0% to 37.7p (2013: 35.9p).

Basic EPS from continuing operations for the period was 31.8p (2013: 48.4p).

Net funds

Net funds are analysed as follows:

In addition to the above net funds, the Group has £143.4m of undrawn committed borrowing facilities available (see note 18).

The Group has a five year revolving credit facility which matures in October 2018. The Group also has $75m private placement debt, due for repayment on 31 May 2019.

Cash flow

Cash generated from operations was £13.5m (2013: £9.6m) and can be summarised as follows:

Risks

The Group Risk Committee, chaired by the chief executive officer, meets periodically and considers new strategic, financial and operational risks as they arise and identifies actions to mitigate those risks. The Board reviews the work undertaken by this committee. Key risks and their mitigation have not changed significantly in the period from those disclosed on pages 45 to 47 of the annual financial statements for the year ended 31 March 2014. The key risks and mitigation are summarised below:

Notwithstanding that no new key risks have been identified in the period, we continue to manage a number of potential risks and uncertainties which could have a material impact on our long-term performance. Many of these risks are common to other companies and we assess them to establish the principal risks for the Group.

Effective risk management continues to be embedded in our governance framework, which is summarised in the Corporate Governance Report on pages 66 to 73 of the annual financial statements for the year ended 31 March 2014.

Going concern

The directors are required to consider the appropriateness of the going concern assertion in the preparation of the Group's condensed consolidated interim financial information for the six months ended 30 September 2014.

The Group meets its day-to-day working capital requirements through cash generated from operations and the use of its banking facilities. The Group has delivered good results and progressed its strategic objectives. It has net funds at 30 September 2014 of £155.3m. In addition, the Group had access to undrawn committed borrowing facilities of £143.4m at 30 September 2014. On 10 October 2013 the Group entered into a new five year revolving credit facility which matures in October 2018. This arrangement provides the Group with a committed credit facility of £200m and the financial capacity to support its strategy. The Group's forecasts and projections, under various scenarios, show that the Group should be able to operate within the level of these facilities.

The Group has a good level of work in hand at 30 September 2014 representing 89% of forecast revenue for the year (2013: 88% - restated for the removal of the UK highways services business disposed of in 2013).

After making enquiries and having considered the Group's results, the strength of its balance sheet and near term outlook, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. It is therefore deemed appropriate to continue to apply the going concern principle in the preparation of its condensed consolidated interim financial information for the six months ended 30 September 2014.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

The directors are listed in the Annual Report for the year ended 31 March 2014. A list of current directors can be found at www.atkinsglobal.com.

By order of the Board

Helen Baker

Acting Company Secretary

13 November 2014

Consolidated income statement for the six months ended 30 September 2014

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated statement of comprehensive income for the six months ended 30 September 2014

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated balance sheet as at 30 September 2014

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated statement of cash flows for the six months ended 30 September 2014

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Consolidated statement of changes in equity as at 30 September 2014

The merger reserve relates to the issue of shares in respect of previous acquisitions.

The accompanying notes form an integral part of this condensed consolidated interim financial information.

Notes to the condensed consolidated interim financial information for the six months ended 30 September 2014 (unaudited)

1. General information

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

Copies of this half year report are available from the Company's registered office: Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England, and may be viewed on the Atkins website www.atkinsglobal.com.

This condensed consolidated interim financial information was approved for issue on 13 November 2014.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2014 were approved by the Board of directors on 11 June 2014 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

This condensed consolidated interim financial information has been reviewed by the Group's auditor, not audited. The review report is included.

2. Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 September 2014 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, Interim financial reporting, as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2014, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Prior period amounts

During the period the Group adopted and applied IFRS 11, Joint arrangements. The consolidated income statements and the consolidated statements of comprehensive income for the six months ended 30 September 2013 and the year ended 31 March 2014 have not been restated, as the restatement was not material. The consolidated balance sheets as at 30 September 2013 and 31 March 2014 and the consolidated statements of changes in equity balances as at 1 April 2013, 30 September 2013 and 31 March 2014 have also not been restated, as the impact on these were not considered material.

In addition, the Group has reviewed its reporting of joint operations and joint ventures, and has amended its definition of revenue for segmental reporting purposes to exclude the Group's share of revenue from joint ventures. As a consequence of the adoption of IFRS 11 and the review of revenue reporting, the segmental results and assets of the operating segments for the six months ended 30 September 2014 have been prepared in accordance with IFRS 11 and this amended definition of revenue. The segmental results and assets for the comparative six month period to 30 September 2013 and for the year ended 31 March 2014 have not been restated, as the changes were not considered material.

IFRS 10, Consolidated financial statements. The adoption of IFRS 10 has had no significant effect on the financial statements for earlier periods and on the interim financial statements for the period ended 30 September 2014. See note 3 for further details regarding the impact of the adoption of IFRS 10 on the Group.

Going concern basis

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing this condensed consolidated interim financial information.

3. Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2014, as described in those annual financial statements, except as described below.

The following standards have been adopted by the Group for the first time for the financial year beginning on 1 April 2014:

IFRS 10, Consolidated financial statements. Under IFRS 10, subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The adoption of IFRS 10 has had no significant effect on the financial statements for earlier period or on the condensed consolidated interim financial information for the period ended 30 September 2014.

IFRS 11, Joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Before 1 April 2014, the Group's interests in jointly controlled entities were accounted for using the equity method. Under IFRS 11, some of the Group's jointly controlled entities have been assessed to be joint operations.

The Group has applied the new policy for its interests in joint operations in accordance with the transition provisions of IFRS 11. The Group has recognised its investment in the assets and liabilities relating to the joint operation, by disaggregating them from the carrying amount of the investment used in applying the equity method.

In respect of its interests in joint operations, the Group recognises its share of assets, liabilities, revenues and expenses. The Group accounts for the assets, liabilities, revenues and expenses in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

The Group has an interest in several joint arrangements. Under IAS 31, some of these joint arrangements were assessed as jointly controlled entities and were equity accounted. The Group has reassessed the classification of all its joint arrangements under IFRS 11.

Based on the facts and circumstances of each joint arrangement, it was assessed that the Group has rights to the assets and obligations for the liabilities in certain of its joint arrangements and they have therefore now been classified as joint operations.

The adoption of IFRS 11 has had no significant effect on the financial statements for earlier periods or on the condensed consolidated interim financial information for the period ended 30 September 2014, and the prior periods have therefore not been restated.

4. Estimates

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2014.

The accounting areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to this condensed consolidated interim financial information are in relation to contract accounting, goodwill impairment, defined benefit pension schemes and tax.

Taxes on income for the six months ended 30 September 2014 are accrued using the estimated underlying tax rate that is expected to apply for the year as a whole, as adjusted for material non-underlying items arising in the six month period.

5. Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 March 2014. There have been no changes to risk management policies since 31 March 2014.

Liquidity risk

Compared to the position at 31 March 2014, there was no material change in the contractual undiscounted cash flows of the Group's non-derivative financial liabilities in the period.

Fair value estimation

The following table analyses the Group's financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1 financial instruments

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the mid market price.

Level 2 financial instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The fair value of certificates of deposit is calculated as the present value of the future cash flows, discounted at an appropriate market rate of interest. The fair value of forward foreign exchange contracts is determined using quoted forward foreign exchange rates at the reporting date and yield curves derived from quoted interest rates matching the maturities of the foreign exchange contracts.

Level 3 financial instruments

The fair value of financial instruments for an asset or liability that are not based on observable market data (that is, unobservable inputs) are Level 3 financial instruments. The main Level 3 inputs used by the Group in estimating the contingent consideration payment are based on revenue and operating profit targets for the first three years from acquisition, followed by operating margin growth levels for the next two years. The Group prepares detailed forecasts on the acquisition of a business and updates these on a quarterly basis as part of its normal operating processes. These forecasts use management's evaluation of the revenue, costs and expected margins, based on past experience. The fair value of the contingent consideration arrangement of £2.3m was calculated by estimating probable future cash flows payable and discounting these at a discount rate of 9.3%.

Valuation processes

The Group's assets and liabilities that are measured at fair value are set out below.