27th Nov 2007 07:01
Atkins (WS) PLC27 November 2007 For release 07:00 27 November 2007 Half-yearly financial report for the six months ended 30 September 2007 Professional services group WS Atkins plc (Atkins) today announced unauditedresults for the six months ended 30 September 2007. FINANCIAL SUMMARY Six months Six months to to Increase / 30 Sept 2007 30 Sept 2006 (Decrease) Income statement - continuingoperationsRevenue £633.8m £569.0m 11%Operating profit £40.1m £27.3m 47%Operating margin 6.3% 4.8%Profit before taxation £42.7m £29.3m 46%Profit after taxation £31.7m £21.1m 50%Diluted earnings per share 30.8p 20.6p 50% Income statement - totalProfit for the period £63.1m £22.0m 187%Diluted earnings per share 61.3p 21.5p 185%Dividend 1 7.5p 6.0p 25% PeopleStaff numbers at 30 September2 16,909 15,005 13%Average staff numbers 16,384 14,594 12% CashNet funds £128.3m £135.6m (5)% Highlights • Very good first half-year results with diluted earnings per share from continuing operations up by 50% • Revenue up 11% to £633.8m reflecting continued growth in strong markets • Operating profit up 47% with margins up significantly to 6.3% (2006: 4.8%) • Staff numbers in continuing operations up over 1,000 since 31 March 2007, as planned • Work in hand strong with 85% of full year forecast revenue secured (2006: 88%) • Disposal of Lambert Smith Hampton completed for a profit of £20.0m • Metronet companies entered PPP Administration on 18 July 2007 • Main defined benefit pension plan closed to future accrual from 30 September 2007 • Interim dividend up 25% to 7.5p per share • Up to £100m share buyback programme announced Notes: 1. Interim dividend declared for six months to 30 September.2. Staff numbers are shown for continuing operations and on a full time equivalent basis, including agency staff. Commenting on the results, Keith Clarke, Chief Executive of Atkins, said: "These are very good results and we are well positioned to improve and grow inour key business of engineering and design. This is a great business in greatshape which is scaleable and enduring." Enquiries AtkinsKeith Clarke, Chief Executive + 44 (0) 1372 726140Robert MacLeod, Group Finance Director + 44 (0) 1372 726140Sara Lipscombe, Group Communications Director + 44 (0) 1372 726140SmithfieldLucinda Kemeny +44 (0) 20 73604900 Notes to Editors 1. AtkinsAtkins (www.atkinsglobal.com) plans, designs and enables the delivery of complexinfrastructure and buildings for clients in the public and private sectorsacross the world. Atkins is the largest multi-disciplinary consultancy inEurope, the largest engineering consultancy in the UK and the world's fifthlargest international design firm (sources: New Civil Engineer Consultants File,2007; Building Magazine, 2007; Engineering News Record, 2007). 2. AttachmentsAttached to this announcement are: the overview of the period, business review,finance review, statement of directors' responsibilities, the unaudited:consolidated income statement, consolidated balance sheet, consolidatedstatement of recognised income and expense, consolidated cash flow statement andnotes to the financial information for the period. 3. Analyst PresentationA presentation for analysts will be held at 08:30 today at The City PresentationCentre, 4 Chiswell Street, Finsbury Square, London EC1Y 4UP.Dial-in details are available from Smithfield for those wishing to join thepresentation by conference call.A webcast of the presentation will subsequently be available via the Company'swebsite, www.atkinsglobal.com. 4. Cautionary StatementThis half-yearly financial report has been prepared for the shareholders of theCompany, as a whole, and its sole purpose and use is to assist shareholders toexercise their governance rights. In particular, this announcement has not beenaudited or otherwise independently verified. The Company and its directors andemployees are not responsible for any other purpose or use or to any otherperson in relation to this announcement.The report contains indications of likely future developments and otherforward-looking statements that are subject to risk factors associated with,among other things, the economic and business circumstances occurring from timeto time in the countries, sectors and business segments in which the Groupoperates. These and other factors could adversely affect the Group's results,strategy and prospects. Forward-looking statements involve risks, uncertaintiesand assumptions. They relate to events and/or depend on circumstances in thefuture which could cause actual results and outcomes to differ. No obligation isassumed to update any forward-looking statements, whether as a result of newinformation, future events or otherwise. OVERVIEW Results The Group has had a very good first half-year. Revenue has grown by 11% to£633.8m and, as anticipated, operating margins have increased significantly from4.8% to 6.3%. Taken together, profit before tax from continuing operationsincreased by 46% to £42.7m. This reflects good performances across all business segments. The Middle Eastbusiness was particularly strong with revenues in that region up 35% comparedwith the same period last year. The significant increase in the Group'soperating margin was driven by improved margins in all segments. We anticipatethat further improvements in operating margins will be made in the years aheadas we focus on targeted markets, in resource-constrained environments, and onfurther cost efficiencies. The investments we have made in staff recruitment, training and development inrecent years continued to yield benefits. As planned, our staff numbers incontinuing operations increased by over 1,000 in the first six months of theyear. At just over 16,900 people, this is 1,900 more than the same time lastyear. Staff numbers have grown across the Group, particularly in the Middle Eastwhere staff numbers are up by more than 40% over last year. On 18 July 2007 the Metronet infrastructure companies entered PPP Administrationand our contracts with Trans4m and Trans4m's contracts with Metronet weresubsequently terminated on 30 August 2007. Since then, we have continued to workdirectly for Metronet under new contractual terms with around 400 staffcurrently engaged on Metronet projects. The Group's results also benefited from the £20m profit on the sale of LambertSmith Hampton and the £17m accelerated release of deferred income in relation toMetronet. Both of these items are shown within discontinued operations. Share buyback The Board has reviewed the strength of the Group's balance sheet following thedisposal of Lambert Smith Hampton and the resolution of the uncertaintysurrounding the Group's investment in Metronet. The Board is mindful of thebenefit of maintaining an efficient balance sheet and on this basis, using theauthority given by shareholders at our AGM held in September 2007, a sharebuyback programme will be commenced shortly with the intention of returning upto £100m to shareholders. It is intended to hold the shares in treasury. Outlook We anticipate that the Group will make good progress in the rest of the year asour work in hand remains strong with 85% of full year forecast revenue secured(2006: 88%). The markets in which we operate are good and as the Group continuesto improve its services, we are confident that we can grow in our targetedmarkets. Notwithstanding the Group's share buyback, we continue to reviewfurther opportunities to invest in the Group's growth. Dividend Demonstrating the confidence in the Group's prospects, the Board has agreed aninterim dividend of 7.5p per share, up 25% compared with the same period lastyear. This interim dividend will be paid on 25 January 2008 to all shareholderson the register on 14 December 2007. BUSINESS REVIEW Design and Engineering Solutions Six months to Six months to Increase / 30 Sept 2007 30 Sept 20061 (Decrease) Revenue £181.8m £155.6m 17%Operating profit £15.7m £11.6m 35%Operating margin 8.6% 7.5%Share of post-tax JV result £(0.1)m £(0.1)mWork in hand 83% 87%Staff numbers at 30 September 4,730 3,938 20%Average staff numbers 4,580 3,862 19% 1. Restated to exclude the results from the European businesses previouslyincluded within Design and Engineering Solutions that are now included withinthe Middle East, China and Europe segment Design and Engineering Solutions performed very well in the first half of theyear with operating profit up 35% through a combination of continued growth andimproved operating margins. Revenue grew by 17% augmented by the contribution ofthe Advantage and Boreas businesses acquired in the second half of the lastyear. The operating margin grew to 8.6% as our continued focus upon deepening skillsin selected markets yielded benefits. Average staff numbers in the period grew by 19% and Design and EngineeringSolutions now has approximately 250 professional staff in India working on UKprojects. Our markets in this segment remain strong, for example: • As anticipated, we are seeing continued growth in nuclear decommissioning projects and significant activity with AWE. • Scottish Water and Southern Water framework contracts, awarded earlier in the year, have contributed significantly to our growth in the water sector. • The integration of Advantage, our acquisition in the defence sector in March 2007, has been successful and we have commenced work on the next phase of the Future Rapid Effects System project. • Our work in the oil and gas sector continues to benefit from high levels of activity and the successful integration of the acquisitions made last year of MSL and Boreas. • We currently have approximately 300 staff working on the London Olympic Park where our activities include environmental impact assessments, planning supervision, infrastructure design on the North Park and project management of all enabling works construction. We also have staff working on the design of tunnels, stations and railway alignment for Crossrail where the recently announced funding package presents further opportunities. • In aerospace, our workload has remained stable and we are positioning ourselves for further growth. Outlook The outlook for Design and Engineering Solutions remains good. Our markets arestrong and secured work in hand represents 83% of the full year forecast revenue(2006: 87%). We are confident that we can continue to make progress. Highways and Transportation Six months to Six months to Increase / 30 Sept 2007 30 Sept 2006 (Decrease) Revenue £134.0m £119.6m 12%Operating profit £8.0m £4.0m 100%Operating margin 6.0% 3.3%Share of post-tax JV profits £0.3m £0.3mWork in hand 89% 92%Staff numbers at 30 September 3,114 3,076 1%Average staff numbers 3,082 3,069 - Highways and Transportation had, as anticipated, a much improved first halfperformance with revenues up 12% and operating profit double the equivalentperiod last year. Revenue has increased primarily as a result of the contribution from theCambridgeshire County Council contract which commenced in September 2006.Operating margins improved from 3.3% to 6.0%, mainly due to the non-recurrenceof set up costs on the two new county council contracts. In October we wereselected as lead bidder on the Highways Agency Area 6 MAC contract. Our transport planning and design businesses performed well and in September weacquired Intelligent Space Partnership, a small company with 18 staff, whichgives us a deeper capability in the modelling of pedestrian movement. Outlook The outlook for Highways and Transportation for the rest of the year is goodwith 89% of forecast revenue secured. The UK government's recent ComprehensiveSpending Review forecast a modest overall increase in transport expenditure overthe next few years and there is continued demand for our services, particularlyto meet the challenge of increasing the capacity and reliability of roadinfrastructure. Rail Six months to Six months to Increase / 30 Sept 2007 30 Sept 20061 (Decrease) Revenue £102.0m £102.6m -Operating profit £3.9m £2.1m 86%Operating margin 3.8% 2.0%Work in hand 87% 91%Staff numbers at 30 September 1,740 1,592 9%Average staff numbers 1,712 1,575 9% 1. Restated to exclude the results from the European businesses previouslyincluded within Rail that are now included within the Middle East, China andEurope segment Rail operating profit increased by 86% while revenue was, as expected, broadlyflat following the large increase in the prior year when work commenced on majorre-signalling projects for Network Rail. On 18 July the Metronet infrastructure companies entered PPP Administration andon 30 August our contracts with Trans4m were terminated. Since then we have beenworking directly for Metronet under new short-term contracts. We continue toprovide station and civils design, plus civils inspection and assessmentcapability and currently have around 400 staff from around the Group working forMetronet. Operating profit has increased by £1.8m to £3.9m as we have started to benefitfrom the improved market environment. Our two key clients, Network Rail andMetronet, generate approximately 80% of this segment's revenue. We anticipatethat our results should continue to improve as we enhance our focus upondelivering a quality service. Outlook The outlook for the rest of the financial year is good with 87% of forecastrevenue secured (2006: 91%). Demand on the UK's rail network continues to grow and as a result we are workingwith Network Rail to find ways to enhance network capacity. In addition, we areincreasingly working for the Passenger Transport Executives (PTEs) to look atways to improve their infrastructure. We also anticipate continued work forMetronet and its successor, albeit at reduced levels. Middle East, China and Europe Six months to Six months to Increase / 30 Sept 2007 30 Sept 20061 (Decrease) Revenue £87.6m £72.6m 21%Operating profit £4.8m £3.0m 60%Operating margin 5.5% 4.1%Work in hand 78% 85% Staff numbers at 30 September 3,679 3,006 22%Average staff numbers 3,440 2,755 25% 1. Restated to include Europe portfolio This year we have reorganised the management of our European businesses and nowreport their results within this expanded segment. Our businesses in Denmark,Ireland, Poland, Portugal and Sweden were previously included within the Railand Design and Engineering Solutions segments. Middle East Six months to Six months to Increase / 30 Sept 2007 30 Sept 2006 (Decrease) Revenue £52.9m £39.2m 35%Operating profit £4.6m £3.0m 53%Operating margin 8.7% 7.7%Staff numbers at 30 September 2,148 1,516 42% Our Middle East business continues to grow rapidly with revenue up 35% andoperating profit up 53%. The business now employs over 2,100 staff, an increaseof 25% in the six-month period and reflective of the continued growth in themarket. There is strong demand for our services and we are establishing a regionalcapability in urban design and master planning to add to our core services inbuilding design and transportation. The Dubai Metro project is proceeding well. We have nearly completed work on theRed Line and have made significant progress on the design of the Green Line. China Six months to Six months to Increase / 30 Sept 2007 30 Sept 2006 (Decrease) Revenue £14.5m £14.4m 1%Operating profit £0.1m £0.2m (50)%Staff numbers at 30 September 835 861 (3)% In China financial performance in the period was broadly in line with the prioryear. We believe the market will become more attractive in the medium term andcontinue to invest in the business. Europe Six months to Six months to Increase / 30 Sept 2007 30 Sept 2006 (Decrease) Revenue £20.2m £19.0m 6%Operating profit £0.1m £(0.2)mStaff numbers at 30 September 696 629 11% In the Europe portfolio the first priority has been to strengthen the localmanagement teams and to position the businesses for growth. This process isunderway. In the first six months of this year a good performance in most of thebusinesses was, however, impacted by a poor performance from our Swedishbusiness. Outlook The Middle East, China and Europe segment is dominated by the Middle East wherethe strong oil price continues to underpin growth in the region and the outlookis excellent. We are investing in the management teams of our China and Europebusinesses to take advantage of opportunities in those markets. Management and Project Services Six months to Six months to Increase / 30 Sept 2007 30 Sept 2006 (Decrease) Revenue £103.1m £93.6m 10%Operating profit £6.5m £5.6m 16%Operating margin 6.3% 6.0%Work in hand 83% 85%Staff numbers at 30 September 2,421 2,226 9%Average staff numbers 2,350 2,168 8% Management and Project Services as a whole continues to expand with operatingprofit up by 16% on revenue growth of 10%. The results of this segment are mainly derived from Faithful+Gould. In the UK,we have performed well and continue to grow in our target sectors of finance,education and industry. Our US business is also growing, with revenue up 12%,driven by a focus on the government, hospitality and energy sectors. The Management Consultants business has had a disappointing start to the year.Although revenue increased by 14% reflecting a full six months of revenue fromMantix, which was acquired in June 2006, there was a significant decrease inoperating profit and management has subsequently been changed. Outlook Prospects for Faithful+Gould in both the UK and US remain strong and we continueto grow our capability and capacity to serve an expanding client base across anumber of different industry and government sectors. Actions taken to improve client focus and improve efficiency in our ManagementConsultants business should benefit future years' results. Asset Management Six months to Six months to Increase / 30 Sept 2007 30 Sept 20061 (Decrease) Revenue £25.3m £25.0m 1%Operating profit £1.2m £1.0m 20%Operating margin 4.7% 4.0%Share of post-tax JV profits £0.1m £0.2mWork in hand 90% 93%Staff numbers at 30 September 675 664 2%Average staff numbers 678 662 2% 1. Restated to include continuing components of the former Equity Investmentssegment Asset Management continues to perform in line with expectations. Operatingprofit increased by 20% reflecting changes in service mix and improved financialcontrol. Outlook Asset Management continues to be a niche business with opportunities presentedby the continuing demand across all markets for independent property managementservices. Discontinued Operations The disposal of Lambert Smith Hampton ("LSH") to the management team for anenterprise value of £46.5m, together with earn-out potential for a further£10.0m, was completed on 20 July 2007. Cash of £40m was received on completionwith the remaining £6.5m in the form of loan notes. The disposal resulted in an exceptional gain of £20m. In the period to disposal,LSH recorded revenue of £16.0m and a profit after tax of £0.2m. The Metronet infrastructure companies entered PPP Administration on 18 July 2007and Trans4m's contracts were terminated on 30 August. An exceptional gain of £17.2m (£12.0m after tax) has arisen on the acceleratedrelease of deferred income following Metronet entering Administration. Thisrelates to the unamortised balance of amounts received by Atkins in April 2003in respect of bid cost recoveries and project development fees. The amountreceived was previously being released to the income statement over the 30 yearlife of the contract in accordance with the Group's policy in relation to bidrecovery fees on PPP/PFI investments. FINANCE REVIEW The Revenue and Operating profit for the six months to 30 September 2007 arediscussed in the preceding Business Review. Taxation The Group's effective tax rate on continuing operations was 25.8% (2006: 28.0%).The effective tax rate of 21.7% for the year ended 31 March 2007 included thebenefit of the approval of a three-year claim for R&D tax credits. Pensions On 30 September 2007 the defined benefit section of the Atkins Pension Plan, theGroup's principal scheme, was closed to future accrual for those members that donot have a statutory or contractual entitlement to a final-salary pension. Thesemembers have transferred to a defined contribution section of the plan witheffect from 1 October 2007. Pension Costs The cost of the Group's defined benefit pension schemes for the six months to30 September 2007 amounted to £11.7m (2006: £12.5m). Funding The Group continued to pay accelerated contributions into the Atkins PensionPlan (six months to 30 September 2007: £25.0m; six months to 30 September 2006:£12.5m). An actuarial valuation is currently under way, the results of which areexpected to be known later in the year. IAS 19 The IAS 19 retirement liability, before deferred tax, is estimated at £158m (30September 2006: £313m; 31 March 2007: £250m). The significant reduction since 31March is due to a number of factors including the reduction in discount ratesassumed, the additional cash contributions made by the Group and the rise inequity markets in the period. The key assumptions and sensitivities used in theIAS 19 valuation are detailed in note 13 to this half-yearly financialinformation. Earnings per share (EPS) Basic EPS for the period was 62.2p, and diluted EPS was 61.3p, both includingthe significant one-off gains in discontinued operations. From continuing operations, basic EPS was 31.3p (six months to September 2006:20.9p) and diluted EPS 30.8p (2006: 20.6p). Net funds Net funds may be analysed as follows: £million 30 Sept 2007 30 Sept 2006 31 March 2007 Cash, cash equivalents 138.9 120.4 187.7Financial assets 26.6 47.2 49.6Debt due within one year (3.5) - (0.4)Debt due after one year (20.7) (17.9) (23.1)Finance leases (13.0) (14.1) (14.7) ------- ------- -------Net funds 128.3 135.6 199.1 ------- ------- ------- Cash flow The decrease in net funds in the six months amounted to £70.8m (2006: £41.0m)which may be summarised as follows: £million Six months to Six months to 30 Sept 2007 30 Sept 2006 Operating profit from continuing operations 40.1 27.3Working capital outflow (48.5) (41.9)Pension contributions in excess of charge tooperating profit (20.7) (10.1)Income tax (paid)/received (14.0) 0.9Dividend paid (14.0) (11.1)Acquisitions (0.6) (8.6)All other items (net) 1.0 7.6 ------- -------Net decrease in net funds on continuingoperations (56.7) (35.9)Discontinued operations: Metronet, Trans4mand related (48.8) (4.9)Discontinued operations: LSH 34.7 (0.2) ------- -------Net decrease in net funds (70.8) (41.0) ------- ------- The working capital outflow of £48.5m was anticipated and reflects the normalseasonality of our business. Risk The Group considers strategic, financial and operational risks and identifiesactions to mitigate those risks. Key risks and their mitigation are disclosed inthe 2007 Annual Report and no significant new risks have been identified in theperiod. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34, as adopted by the European Union, and thatthe half-yearly management report includes a fair review of the informationrequired by DTR 4.2.7 and DTR 4.2.8. There has been no change to the directors of WS Atkins plc listed in the AnnualReport for 31 March 2007. By order of the Board Richard WebsterCompany Secretary 27 November 2007 Consolidated income statement for the six months ended 30 September 2007(unaudited) --------------------------- ------ ---------- --------- ---------- Six months Six months to to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £m £m £m--------------------------- ------ ---------- --------- ----------Continuing operationsRevenue (Group and share ofJoint Ventures) 665.8 597.3 1,240.3 --------------------------- ------ ---------- --------- ----------Revenue 4 633.8 569.0 1,179.8Cost of sales - normal (411.7) (386.4) (777.1)Cost of sales - exceptional 8 - - (4.0)--------------------------- ------ ---------- --------- ----------Gross profit 222.1 182.6 398.7 Administrative expenses (182.0) (155.3) (335.0)--------------------------- ------ ---------- --------- ----------Operating profit 4,13 40.1 27.3 63.7 Share of post-tax profit fromJoint Ventures 5 0.3 0.4 2.8--------------------------- ------ ---------- --------- ----------Profit from operations 40.4 27.7 66.5 Finance income 6 5.0 4.1 9.0Finance cost 6 (2.7) (2.5) (5.4)--------------------------- ------ ---------- --------- ----------Net finance income 6 2.3 1.6 3.6--------------------------- ------ ---------- --------- ----------Profit before taxation 42.7 29.3 70.1 Income tax expense - normal 7 (11.0) (8.2) (16.4)Income tax expense -exceptional 7,8 - - 1.2--------------------------- ------ ---------- --------- ----------Profit for the period fromcontinuing operations 31.7 21.1 54.9 Discontinued operations 5,9 31.4 0.9 (112.2)--------------------------- ------ ---------- --------- ----------Profit / (loss) for theperiod attributable to equity shareholders 63.1 22.0 (57.3)--------------------------- ------ ---------- --------- ---------- Earnings per share From continuing anddiscontinuedoperations (total)Basic earnings / (loss) pershare 11 62.2p 21.9p (56.8)pDiluted earnings / (loss) pershare 11 61.3p 21.5p (56.8)p From continuing operationsBasic earnings per share 11 31.3p 20.9p 54.4pDiluted earnings per share 11 30.8p 20.6p 53.8p DividendsDividends recognised in theperiod - paid 10 14.0p 11.5p 17.5pDividends relating to theperiod - proposed 10 7.5p 6.0p 20.0p--------------------------- ------ ---------- --------- ---------- The notes on pages 14 to 25 form part of the half-yearly financial information. Consolidated balance sheet as at 30 September 2007 (unaudited) ------------------------ ------ ---------- --------- ---------- 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £m £m £m------------------------ ------ ---------- --------- ----------AssetsNon-current assetsGoodwill 49.3 43.1 64.8Other intangible assets 6.1 10.7 9.4Property, plant andequipment 43.4 47.9 46.2Investments in JointVentures 2.8 54.9 (26.0)Financial assets - 20.1 -Deferred income tax assets 59.0 109.1 89.8Trade and other receivables 5.4 0.5 0.1------------------------ ------ ---------- --------- ---------- 166.0 286.3 184.3------------------------ ------ ---------- --------- ---------- Current assetsInventories 0.5 0.4 0.4Trade and other receivables 300.2 277.3 284.0Financial assets 26.6 27.1 49.6Cash and cash equivalents 138.9 120.4 187.7------------------------ ------ ---------- --------- ---------- 466.2 425.2 521.7------------------------ ------ ---------- --------- ---------- LiabilitiesCurrent liabilitiesBorrowings 12 (7.0) (3.8) (3.7)Trade and other payables (365.9) (344.6) (418.7)Current income taxliabilities (23.9) (20.2) (28.3)Provisions for liabilitiesand charges (7.7) (2.5) (8.7)------------------------ ------ ---------- --------- ---------- (404.5) (371.1) (459.4)------------------------ ------ ---------- --------- ----------Net current assets 61.7 54.1 62.3------------------------ ------ ---------- --------- ---------- Non-current liabilitiesBorrowings 12 (30.2) (28.2) (34.5)Provisions for liabilitiesand charges (12.7) (10.5) (14.3)Retirement benefitliabilities 13 (158.0) (313.0) (250.1)Other non-currentliabilities (4.3) (23.7) (23.8)------------------------ ------ ---------- --------- ---------- (205.2) (375.4) (322.7)------------------------ ------ ---------- --------- ----------Net assets / (liabilities) 22.5 (35.0) (76.1)------------------------ ------ ---------- --------- ---------- Capital and reservesOrdinary shares 14,15 0.5 0.5 0.5Share premium account 15 62.4 62.4 62.4Merger reserve 15 8.9 8.9 8.9Retained loss 15 (49.3) (106.8) (147.9)------------------------ ------ ---------- --------- ----------Equity shareholders' funds/(deficit) 22.5 (35.0) (76.1)------------------------ ------ ---------- --------- ---------- The notes on pages 14 to 25 form part of the half-yearly financial information. Consolidated cash flow statement for the six months ended 30 September 2007(unaudited) ------------------------------ ------ ---------- ---------- ----------- Six months Six months Year to to to 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £m £m £m------------------------------ ------ --------- --------- ----------Cash flows from operatingactivitiesCash (used in) / generatedfrom operations 16 (16.8) (9.3) 93.9Interest received 5.0 4.1 8.9Interest paid (1.5) (0.8) (2.1)Income tax (paid) / received (14.0) 0.9 4.9Discontinued operations 9 3.5 1.4 10.8------------------------------ ------ --------- --------- ----------Net cash (used in)/generatedfrom operating activities (23.8) (3.7) 116.4------------------------------ ------ --------- --------- ----------Cash flows from investingactivitiesDistributions received fromJoint Ventures 0.3 0.2 1.7Investments in Joint Ventures (0.4) - -Acquisition of subsidiaries- Consideration (0.8) (11.0) (29.6)- Cash acquired 0.2 2.4 3.4Purchases of property, plantand equipment (9.3) (8.3) (16.2)Proceeds from disposal ofproperty, plant and equipment 0.4 0.3 0.6Financial assets 23.0 (6.4) (8.8)Purchases of other intangibleassets (3.5) (5.1) (8.6)Discontinued operations 9 (17.3) (5.9) (20.5)------------------------------ ------ --------- --------- ----------Net cash used in investingactivities (7.4) (33.8) (78.0)------------------------------ ------ --------- --------- ----------Cash flows from financingactivitiesRepayment of short-term loans - (2.7) (2.7)Repayment of long-term loans - (1.4) (1.6)Finance lease principalpayments (1.9) (1.3) (2.8)Sales of own shares byEmployee Benefit Trusts - 0.1 0.1Equity dividends paid toshareholders (14.0) (11.1) (17.7)Discontinued operations 9 (0.3) (0.6) (1.2)------------------------------ ------ --------- --------- ----------Net cash used in financingactivities (16.2) (17.0) (25.9)------------------------------ ------ --------- --------- ----------Net (decrease)/increase incash, cash equivalents and bank overdrafts (47.4) (54.5) 12.5------------------------------ ------ --------- --------- ----------Cash, cash equivalents andbank overdrafts at beginning of period 187.7 177.4 177.4Exchange losses on cash,cash equivalents and bank overdrafts (1.4) (2.5) (2.2)------------------------------ ------ --------- --------- ----------Cash, cash equivalents andbank overdrafts at end of period 138.9 120.4 187.7------------------------------ ------ --------- --------- ---------- The notes on pages 14 to 25 form part of the half-yearly financial information. Consolidated statement of recognised income and expense for the six months ended30 September 2007 (unaudited) ------------------------------ ------ --------- --------- ---------- Six months Six months to to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £m £m £m------------------------------ ------ --------- --------- ----------Actuarial gain / (loss) onretirement benefit liabilities 13 72.0 (22.0) 31.3Share of Joint Venturefinancial derivatives (0.2) 4.0 7.5Tax on items charged toequity (24.2) 6.6 (8.5)Net differences on exchange (0.6) (0.4) (0.2)------------------------------ ------ --------- --------- ----------Net income / (expense)recognised directly to equity 47.0 (11.8) 30.1Profit / (loss) for theperiod 63.1 22.0 (57.3)------------------------------ ------ --------- --------- ----------Total recognised income andexpense for the year attributable to equity shareholders 110.1 10.2 (27.2)------------------------------ ------ --------- --------- ---------- The notes on pages 14 to 25 form part of the half-yearly financial information. Notes to the financial information for the six months ended 30 September 2007(unaudited) 1.General Information WS Atkins plc is a public limited company incorporated and domiciled in Englandwith company number 1885586. The Company has its primary listing on the LondonStock Exchange. Copies of this half-yearly report are available from the registered office:Woodcote Grove, Ashley Road, Epsom, Surrey, KT18 5BW, England and may be viewedon the Atkins website www.atkinsglobal.com. This condensed consolidated half-year financial information was approved forissue on 27 November 2007. It has not been audited or reviewed by the Group'sindependent auditors. These half-year financial results do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. Statutory accounts for theyear ended 31 March 2007 were approved by the Board of directors on 26 June 2007and delivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified, did not contain an emphasis of matter paragraph anddid not contain any statement under Section 237 of the Companies Act 1985. 2. Basis of preparation This condensed consolidated half-yearly financial information for the six monthsended 30 September 2007 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34, 'Interimfinancial reporting' as adopted by the European Union. The half-yearly condensedconsolidated financial report should be read in conjunction with the annualfinancial statements for the year ended 31 March 2007, which have been preparedin accordance with EU-Adopted International Financial Reporting Standards(IFRSs), IFRIC interpretations and the Companies Act 1985 applicable tocompanies reporting under IFRS. 3. Accounting policies The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 March 2007, as described in thoseannual financial statements. There have been no new standards or interpretationsadopted. 4. Segmental reporting - business segments ------------------ ------ ------- ------ ------- ------- ------- Share of post-tax profit / (loss) Inter- from Total segment Operating Operating JointSix months to revenue revenue Revenue profit Margin Ventures30 September £m £m £m £m % £m2007 ------------------ ------ ------- ------ ------- ------- -------Design andEngineeringSolutions 189.9 (8.1) 181.8 15.7 8.6% (0.1)Highways andTransportation 140.5 (6.5) 134.0 8.0 6.0% 0.3Rail 113.0 (11.0) 102.0 3.9 3.8% -Middle East, Chinaand Europe 96.6 (9.0) 87.6 4.8 5.5% -Management andProject Services 107.9 (4.8) 103.1 6.5 6.3% -Asset Management 26.3 (1.0) 25.3 1.2 4.7% 0.1------------------ ------ ------- ------ ------- ------- -------Total continuingsegments 674.2 (40.4) 633.8 40.1 6.3% 0.3Discontinuedoperations 33.3 (0.1) 33.2 17.0 51.2% ------------------- ------ ------- ------ ------- ------- -------Total 707.5 (40.5) 667.0 57.1 8.6% 0.3------------------ ------ ------- ------ ------- ------- ------- ------------------ ------ ------- ------ ------- ------- ------- Share of post-tax profit / (loss) Inter- From Total segment Operating Operating JointSix months to revenue revenue Revenue profit Margin Ventures30 September 2006 £m £m £m £m % £m(restated) ------------------ ------ ------- ------ ------- ------- -------Design andEngineeringSolutions 162.5 (6.9) 155.6 11.6 7.5% (0.1)Highways andTransportation 129.0 (9.4) 119.6 4.0 3.3% 0.3Rail 114.4 (11.8) 102.6 2.1 2.0% -Middle East, Chinaand Europe 76.6 (4.0) 72.6 3.0 4.1% -Management andProject Services 98.3 (4.7) 93.6 5.6 6.0% -Asset Management 26.5 (1.5) 25.0 1.0 4.0% 0.2------------------ ------ ------- ------ ------- ------- -------Total continuingsegments 607.3 (38.3) 569.0 27.3 4.8% 0.4Discontinuedoperations 36.5 - 36.5 2.6 7.1% (0.7)------------------ ------ ------- ------ ------- ------- -------Total 643.8 (38.3) 605.5 29.9 4.9% (0.3)------------------ ------ ------- ------ ------- ------- ------- ------------------ ------ ------- ------ ------- ------- ------- Share of post-tax profit / (loss) Inter- From Total segment Operating Operating Joint revenue revenue Revenue profit margin VenturesYear to 31 March £m £m £m £m % £m2007 (restated) ------------------ ------ ------- ------ ------- ------- -------Design andEngineeringSolutions 333.6 (12.8) 320.8 25.9 8.1% -Highways andTransportation 265.9 (15.4) 250.5 13.2 5.3% 0.6Rail 238.4 (23.3) 215.1 2.6 1.2% -Middle East, Chinaand Europe 161.6 (12.7) 148.9 7.5 5.0% -Management andProject Services 201.9 (8.3) 193.6 12.5 6.5% -Asset Management 53.5 (2.6) 50.9 2.0 3.9% 2.2------------------ ------ ------- ------ ------- ------- -------Total continuingsegments 1,254.9 (75.1) 1,179.8 63.7 5.4% 2.8Discontinued -trading 83.8 - 83.8 8.9 10.6% (48.2)Discontinued -impairment of investment inJoint Ventures (70.0)------------------ ------ ------- ------ ------- ------- -------Total 1,338.7 (75.1) 1,263.6 72.6 5.7% (115.4)------------------ ------ ------- ------ ------- ------- ------- 4. Segmental reporting - business segments (continued) Included within Operating profit for the year to 31 March 2007 is £4.0mexceptional loss (refer note 8) relating to Design and Engineering Solutions(£1.1m), Rail (£2.6m) and Management and Project Services (£0.3m). Design and Engineering Solutions and Rail segments have been restated to excludethe results of other European businesses that are now reported within the MiddleEast, China and Europe segment. The continuing elements of the former EquityInvestments segment are now shown within Asset Management. 5. Share of post-tax profit/(loss) from Joint Ventures ----------------------- --------- --------- --------- Discontinued Continuing (note 9) TotalSix months to 30 September 2007 £m £m £m----------------------- --------- --------- ---------Revenue 32.0 144.7 176.7Operating expenditure (31.8) (138.7) (170.5)----------------------- --------- --------- ---------Operating profit 0.2 6.0 6.2Finance cost (2.1) (8.3) (10.4)Finance income 2.3 0.9 3.2----------------------- --------- --------- ---------Profit / (loss) before taxation 0.4 (1.4) (1.0)Income tax (expense) / credit (0.1) 1.4 1.3----------------------- --------- --------- ---------Share of post-tax profit from Joint Ventures 0.3 - 0.3----------------------- --------- --------- --------- ----------------------- --------- --------- --------- Discontinued Continuing (note 9) TotalSix months to 30 September 2006 £m £m £m----------------------- --------- --------- ---------Revenue 28.3 158.5 186.8Operating expenditure (27.9) (159.9) (187.8)----------------------- --------- --------- ---------Operating profit / (loss) 0.4 (1.4) (1.0)Finance cost (2.2) (7.7) (9.9)Finance income 2.3 8.2 10.5----------------------- --------- --------- ---------Profit / (loss) before taxation 0.5 (0.9) (0.4)Income tax (expense) / credit (0.1) 0.2 0.1----------------------- --------- --------- ---------Share of post-tax profit / (loss) from Joint Ventures 0.4 (0.7) (0.3)----------------------- --------- --------- --------- ----------------------- --------- --------- --------- Discontinued Continuing (note 9) TotalYear to 31 March 2007 £m £m £m----------------------- --------- --------- ---------Revenue 60.5 315.8 376.3Operating expenditure (58.1) (377.9) (436.0)----------------------- --------- --------- ---------Operating profit / (loss) 2.4 (62.1) (59.7)Finance cost (4.4) (19.4) (23.8)Finance income 4.7 19.2 23.9----------------------- --------- --------- ---------Profit / (loss) before taxation 2.7 (62.3) (59.6)Income tax credit 0.1 14.1 14.2----------------------- --------- --------- ---------Share of post-tax profit / (loss) from Joint Ventures 2.8 (48.2) (45.4)----------------------- --------- --------- --------- 6. Net finance (income)/cost --------------------------------- --------- --------- --------- Six months to Six months to Year to 30 Sept 2007 30 Sept 2006 31 March 2007 £m £m £m--------------------------------- --------- --------- ---------Interest payable on borrowings 1.2 0.5 1.0Hire purchase and finance leases 0.3 0.3 0.7Unwinding of discount 0.3 0.3 0.5Net finance cost on retirementbenefit liabilities 0.6 1.2 2.4(note 13)Other 0.3 0.2 0.8--------------------------------- --------- --------- ---------Finance cost 2.7 2.5 5.4Finance income (5.0) (4.1) (9.0)--------------------------------- --------- --------- ---------Net finance income (2.3) (1.6) (3.6)--------------------------------- --------- --------- --------- 7. Income taxes The Group's income tax expense from continuing activities (including the Group'sshare of jointly controlled entities' income tax) for the six months ended 30September 2007 is calculated on the estimated average annual effective incometax rate of 25.8% (six months ended 30 September 2006: 28.0% and year ended 31March 2007: 21.7%). This effective rate differs from the UK standard corporationtax rate of 30% (six months ended 30 September 2006: 30% and year ended 31 March2007: 30%) due to items such as the effect of tax rates in foreignjurisdictions, R&D tax credits and non-deductible expenses. It has been announced that the UK standard corporation tax rate applicable tothe Company will change from 30% to 28% with effect from 1 April 2008. Deferredtax has been calculated in accordance with IAS 12 'Income Taxes' at 30% forthose timing differences which reverse before 1 April 2008 and at 28% for thosetiming differences which are expected to reverse after 1 April 2008. This hasresulted in a £3.3m reduction in the deferred tax asset. 8. Exceptional items (Year ended 31 March 2007) Exceptional items originally disclosed in the financial statements for the yearended 31 March 2007 related to the Metronet Enterprise. As a result of MetronetBCV Limited and Metronet SSL Limited entering PPP Administration, the majorityof these items are now disclosed under Discontinued operations (see note 9). Theexceptional charges shown below are in respect of the Group's supply chain workand relate to anticipated future losses. Year to 31 March 2007Operating entities' exceptional items: £m-------------------------------- ---------Atkins supply chain exceptional loss included in operatingprofit (4.0)Tax credit on exceptional loss 1.2-------------------------------- ---------Operating entities' post-tax exceptional loss (2.8)-------------------------------- --------- 9. Discontinued operations Metronet Joint Venture, Trans4m Joint Venture and related discontinued revenueand costs Metronet BCV Limited and Metronet SSL Limited entered PPP Administration on 18July 2007 and Trans4m's contracts were terminated on 30 August 2007. Their results are presented in this condensed half-year financial information asa discontinued operation and are also separately disclosed in note 5. Inaddition, certain associated revenues and costs, including the acceleratedrelease of deferred income relating to the reimbursement of bid costs receivedat financial close in April 2003, have been classified as discontinued. Financial information relating to these operations for the period to date is setout below. The income statement and cash flow statement distinguish discontinuedoperations from continuing operations. Income statement and cash flow information ------------------------- --------- --------- --------- Six months Six months to to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m------------------------- --------- --------- ---------Revenue 17.2 1.0 2.0Administrative Expenses (0.4) (0.3) (0.6)Net finance cost (0.8) (0.5) (1.0)Impairment of investment inJoint Ventures - - (70.0)Share of post-tax loss fromJoint Ventures (note 5) - (0.7) (48.2)------------------------- --------- --------- ---------Profit / (loss) before taxation 16.0 (0.5) (117.8)Income tax expense (4.8) (0.1) (0.1)------------------------- --------- --------- ---------Profit / (loss) after income taxof discontinued operations 11.2 (0.6) (117.9)------------------------- --------- --------- ---------Operating cash flows fromdiscontinued operations (0.8) 0.4 0.7Investing cash flows fromdiscontinued operations (48.0) (5.3) (18.0)Financing cash flows from discontinued operations - - -------------------------- --------- --------- ---------Total cash flows fromdiscontinued operations (48.8) (4.9) (17.3)------------------------- --------- --------- --------- Lambert Smith Hampton (LSH) On 25 June 2007 contracts were exchanged for the disposal of LSH for a totalconsideration valued at £50.8m together with earn-out potential for a further£10m depending on LSH's performance in the year ending 31 March 2008. The profiton disposal was £20.0m, assuming that no additional payments are made inrelation to the performance in the year ending 31 March 2008. Goodwill disposedof was £17.5m, including £2.6m within LSH's own balance sheet. LSH's results and the profit on disposal are presented in this condensedhalf-year financial information as a discontinued operation. Financial information relating to LSH for the period to date of disposal is setout below. The income statement and cash flow statement distinguish discontinuedoperations from continuing operations. 9. Discontinued operations (continued)Lambert Smith Hampton (continued) Income statement and cash flow information ------------------------- --------- --------- --------- Six months to Six months to Year to 30 Sept 2007 30 Sept 2006 31 March 2007 £m £m £m------------------------- --------- --------- ---------Revenue 16.0 35.5 81.8Cost of sales and Administrativeexpenses (15.8) (33.6) (74.3)Net finance income 0.2 0.2 0.6------------------------- --------- --------- ---------Profit before taxation 0.4 2.1 8.1Income tax expense (0.2) (0.6) (2.4)------------------------- --------- --------- ---------Profit after income tax ofdiscontinued operations 0.2 1.5 5.7------------------------- --------- --------- --------- Pre-tax profit on disposal 20.0 - -Income tax expense - - -------------------------- --------- --------- ---------After-tax profit on disposal 20.0 - -------------------------- --------- --------- --------- Profit from discontinuedoperations 20.2 1.5 5.7------------------------- --------- --------- --------- Operating cash flows fromdiscontinued operations 4.3 1.0 10.1Investing cash flows fromdiscontinued operations (0.2) (0.6) (2.5)Investing cash flows - cashproceeds on disposal net 30.9 - -of cash disposedFinancing cash flows fromdiscontinued operations (0.3) (0.6) (1.2)------------------------- --------- --------- ---------Total cash flows fromdiscontinued operations 34.7 (0.2) 6.4------------------------- --------- --------- --------- Consideration received and receivable: Initial cash consideration 40.0Working capital adjustment 5.5Loan notes 6.5Discounting of loan notes to present value (1.2)------------------------- ---------Disposal consideration 50.8------------------------- --------- Assets and liabilities of LSH as at 25 June 2007, the effective date of thedisposal 25 June 2007 £m Goodwill 2.6Property, plant and equipment 5.4Trade and other receivables 18.5Cash and cash equivalents 14.6Trade and other payables (24.2)Borrowings (4.0)Other liabilities (0.1)------------------------- ---------Net assets and liabilities of LSH 12.8------------------------- --------- 10. Dividends ----------------- ------- -------- ------- ------- ------- ------ Six Six Six Six months months months months to to to to 30 Year to Year to 30 Sept 30 Sept 30 Sept Sept 31 March 31 March 2007 2007 2006 2006 2007 2007 pence £m pence £m pence £m----------------- ------- -------- ------- ------- ------- ------Final dividendrecognised forthe year ended 31 March2007 (2006) 14.0p 14.2 11.5p 11.6 11.5p 11.6Half-year dividendrecognised forthe period ended 30 Sept 2006 - - - - 6.0p 6.1----------------- ------- -------- ------- ------- ------- ------Dividendsrecognised inthe period 14.0p 14.2 11.5p 11.6 17.5p 17.7----------------- ------- -------- ------- ------- ------- ------ Half-yeardividendproposed forthe period ended 30 Sept 2007 (2006) 7.5p 7.6 6.0p 6.1 6.0p 6.1Final dividendproposed forthe year ended 31 March 2007 - - - - 14.0p 14.2----------------- ------- -------- ------- ------- ------- ------Dividendsrelating tothe period (paid and proposed) 7.5p 7.6 6.0p 6.1 20.0p 20.3----------------- ------- -------- ------- ------- ------- ------ 11. Earnings per share (EPS) Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of shares in issue duringthe period excluding shares held by the Employee Benefit Trusts (EBTs) whichhave not unconditionally vested in the employees. Diluted earnings per share is the basic earnings per share after allowing forthe dilutive effect of the conversion into ordinary shares of the number ofoptions outstanding during the period. The options relate to long term incentiveplans and deferred bonus plans. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below: ---------------------------- --------- --------- --------- Six months Six months to to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 number number number ('000) ('000) ('000)---------------------------- --------- --------- ---------Number of sharesWeighted average number ofshares used in basic EPS 101,439 100,665 100,901and normalised EPSEffect of dilutive securities- Share options 1,420 1,623 1,204---------------------------- --------- --------- ---------Weighted average number of shares used indiluted EPSand normalised diluted EPS 102,859 102,288 102,105---------------------------- --------- --------- --------- £m £m £m---------------------------- --------- --------- ---------Earnings - continuing and discontinuedoperationsProfit / (loss) for the periodattributable to equityshareholders 63.1 22.0 (57.3)---------------------------- --------- --------- --------- Earnings - continuing operationsProfit for the periodattributable to equityshareholders 31.7 21.1 54.9Exceptional items (note 8) - - 2.8---------------------------- --------- --------- ---------Normalised earnings 31.7 21.1 57.7---------------------------- --------- --------- --------- 11. Earnings per share (continued) ---------------------------- --------- --------- --------- Six months Six months to to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 pence pence pence---------------------------- --------- --------- ---------Continuing and discontinuedoperationsBasic earnings / (loss) pershare (post exceptional) 62.2 21.9 (56.8)Diluted earnings / (loss) pershare (post exceptional) 61.3 21.5 (56.8)---------------------------- --------- --------- ---------Continuing operationsBasic earnings per share (postexceptional) 31.3 20.9 54.4Diluted earnings per share (postexceptional) 30.8 20.6 53.8 Normalised basic earnings pershare (pre exceptional) 31.3 20.9 57.2Normalised diluted earnings pershare (pre exceptional) 30.8 20.6 56.5---------------------------- --------- --------- --------- Normalised diluted EPS (before exceptional items) is considered to be the mostrepresentative measure of underlying trading. 12. Borrowings ----------------------------- --------- ---------- --------- 30 Sept 2007 30 Sept 2006 31 March 2007 £m £m £m----------------------------- --------- ---------- ---------CurrentHire purchase and financeleases 3.5 3.8 3.3Loan notes 3.5 - 0.4----------------------------- --------- ---------- --------- 7.0 3.8 3.7----------------------------- --------- ---------- --------- Non-currentBank loans 16.9 17.9 17.3Hire purchase and financeleases 9.5 10.3 11.4Loan notes 3.8 - 5.8----------------------- ------ --------- ---------- --------- 30.2 28.2 34.5 ----------------------- ------ --------- ---------- --------- Movements in borrowings are analysed as follows: ----------------------------- --------- ---------- --------- Six months Six months to to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m----------------------------- --------- ---------- ---------At beginning of period 38.2 41.6 41.6Acquisition of subsidiaries 1.5 - 6.2Additions to finance leases 3.8 3.2 0.4Repayment of borrowings - (4.1) (4.3)Repayment of finance leases (1.9) (1.3) (2.8)Disposal of finance leases - (0.3) -Difference on exchange (0.4) (1.2) (1.7)Reclassification of leaseincentives - (5.3) -Borrowings of discontinuedoperations (4.0) (0.6) (1.2)----------------------------- --------- ---------- ---------At end of period 37.2 32.0 38.2----------------------------- --------- ---------- --------- 13. Retirement benefit liabilities The Group operates both defined benefit and defined contribution pensionschemes. The two main defined benefit schemes are the Atkins Pension Plan andthe Railways Pension Scheme, both of which are funded final salary schemes. Theassets of both schemes are held in separate trustee administered funds. Otherpension schemes include the Atkins McCarthy Pension Plan in the Republic ofIreland, which is a final salary funded defined benefit scheme, and a range ofdefined contribution schemes or equivalent. 13. Retirement benefit liabilities (continued) At 30 September 2007 the defined benefit section of the Atkins Pension Plan wasclosed to future accrual of benefit for members that do not enjoy a statutory orcontractual right to a final salary pension. These members have transferred to adefined contribution section of the plan with effect from 1 October 2007. 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 benefitliabilities for the Atkins Pension Plan and the Railways Pension Scheme arelisted in the table below. ---------------------------- --------- -------- -------- 30 Sept 30 Sept 31 March 2007 2006 2007---------------------------- --------- -------- --------Price inflation 3.30% 2.90% 3.10%Rate of increase of pensions in paymentLimited Price Indexation 3.30% 2.90% 3.10%Limited Price Indexation to 2.5% 2.50% 2.50% 2.50%Fixed 5.00% 5.00% 5.00%Rate of increase in salaries 4.80% 4.40% 4.60%Rate of increase for deferredpensioners 3.30% 2.90% 3.10%Discount rate 5.90% 5.05% 5.35%Expected rate of return on plan assets 6.70% 6.90% 6.70%Expected rate of social securityincreases 3.30% 2.90% 3.10%Longevity at age 65 for current pensionersMen 18.8 years 18.7 years 18.8 yearsWomen 21.8 years 21.7 years 21.8 years Longevity at age 65 for future pensioners(current age 45)Men 21.0 years 20.9 years 21.0 yearsWomen 24.0 years 23.9 years 24.0 years---------------------------- --------- -------- -------- The components of the defined benefit pension cost are as follows: ----------------------------- -------- -------- -------- Six months Six months Year to to 30 Sept to 30 Sept 31 March 2007 2006 2007 £m £m £m----------------------------- -------- -------- --------Cost of salesCurrent service cost 11.1 11.3 22.5----------------------------- -------- -------- -------- Finance cost / (income)Finance cost 28.1 25.8 51.7Expected return on plan assets (27.5) (24.6) (49.3)----------------------------- -------- -------- --------Net finance cost 0.6 1.2 2.4----------------------------- -------- -------- ------------------------------------- -------- -------- --------Total charge to income statement fordefined benefit schemes 11.7 12.5 24.9----------------------------- -------- -------- -------- Statement of recognised income andexpense(Loss) / gain on pension scheme assets (7.0) (23.4) 3.4Changes in assumptions 79.0 1.4 27.9----------------------------- -------- -------- --------Actuarial gain /(loss) 72.0 (22.0) 31.3Deferred tax charged to equity (24.2) 6.6 (9.6)----------------------------- -------- -------- --------Actuarial gain / (loss) net of deferredtax 47.8 (15.4) 21.7----------------------------- -------- -------- -------- 13. Retirement benefit liabilities (continued) Retirement benefit liabilities comprise the following: ----------------------------- -------- -------- -------- 30 Sept 30 Sept March 2007 2006 2007 £m £m £m----------------------------- -------- -------- --------Defined benefit obligation (1,013.0) (1,055.6) (1,058.2)Fair value of plan assets 855.0 742.6 808.1----------------------------- -------- -------- --------Retirement benefit liabilities (158.0) (313.0) (250.1)Deferred tax on retirement benefitliabilities 44.6 93.9 75.0----------------------------- -------- -------- --------Post-tax retirement benefit liabilities (113.4) (219.1) (175.1)----------------------------- -------- -------- -------- Under the Atkins Pension Plan there are retirement benefit liabilities of£155.5m (30 September 2006: £286.2m; 31 March 2007: £235.0m) representing£111.5m after deferred tax (30 September 2006: £200.3m; 31 March 2007: £164.5m). Under the Railways Pension Scheme there are retirement benefit liabilities of£2.0m (30 September 2006: £26.3m; 31 March 2007: £14.5m) representing £1.4mafter deferred tax (30 September 2006: £18.4m; 31 March 2007: £10.2m). Under other defined benefit schemes there are retirement benefit liabilities of£0.5m (30 September 2006: £0.5m; 31 March 2007: £0.6m). Movements in the retirement benefit liabilities are as follows: ----------------------------- -------- -------- -------- Six months Six months Year to to 30 Sept to 30 Sept 31 March 2007 2006 2007 £m £m £m----------------------------- -------- -------- --------At beginning of period (250.1) (299.9) (299.9)Service cost (11.1) (11.3) (22.5)Net finance cost (0.6) (1.2) (2.4)Contributions 31.8 21.4 43.4Actuarial gain / (loss) 72.0 (22.0) 31.3----------------------------- -------- -------- --------At end of period (158.0) (313.0) (250.1)----------------------------- -------- -------- -------- The approximate effect on the liabilities from changes in the main assumptionsused to value the liabilities are as follows: ---------------- ----------------- ----------------- ----------------- Effect on plan liabilities Change in Atkins Pension Railways assumption Plan Pension Scheme---------------- ----------------- ----------------- -----------------Discount rate Increase/decrease Decrease/increase Decrease/increase 0.5% 10.0% 9.0%Inflation Increase/decrease Increase/decrease Increase/decrease 0.5% 6.5% 9.0%Real rate of increase in Increase/decrease Increase/decrease Increase/decreasesalaries 0.5% 2.0% 3.0%Longevity Increase 1 year Increase 4.0% Increase 3.0%---------------- ----------------- ----------------- ----------------- The effect of the change in inflation on the liabilities assumes a correspondingchange in salary increases and inflation-related pension increases. 14. Ordinary shares ---------------------------- --------- --------- --------- 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m---------------------------- --------- --------- ---------AuthorisedAt beginning and end of period,ordinary shares of 0.5p each 0.8 0.8 0.8---------------------------- --------- --------- ---------Issued and fully paid ordinary shares of0.5p eachAt beginning of period 0.5 0.5 0.5---------------------------- --------- --------- ---------At end of period 0.5 0.5 0.5---------------------------- --------- --------- --------- 15. Statement of changes in equity --------------------- ------- ------- ------ ------- --------- Share Retained Equity Share premium Merger (loss) / shareholders' capital account reserve earnings (deficit)/ funds £m £m £m £m £m--------------------- ------- ------- ------ ------- ---------Balance at 1 April2007 0.5 62.4 8.9 (147.9) (76.1)Profit for theperiod - - - 63.1 63.1Dividends - - - (14.2) (14.2)Actuarial gain onretirement benefitliabilities (note13) - - - 47.8 47.8Share-basedmovements - - - 2.7 2.7Employee Benefit - - - - -TrustsShare of JointVenture financialderivatives - - - (0.2) (0.2)Net differences onexchange - - - (0.6) (0.6)--------------------- ------- ------- ------ ------- ---------Balance at 30September 2007 0.5 62.4 8.9 (49.3) 22.5--------------------- ------- ------- ------ ------- --------- --------------------- ------- ------- ------ ------- --------- Share Retained Equity Share premium Merger (loss) / shareholders' capital account reserve earnings (deficit)/funds £m £m £m £m £m--------------------- ------- ------- ------ ------- ---------Balance at 1 April2006 0.5 62.4 8.9 (107.9) (36.1)Profit for theperiod - - - 22.0 22.0Dividends - - - (11.6) (11.6)Actuarial loss onretirement benefitliabilities (note13) - - - (15.4) (15.4)Share-basedmovements - - - 2.4 2.4Employee BenefitTrusts - - - 0.1 0.1Share of JointVenture financialderivatives - - - 4.0 4.0Net differences onexchange - - - (0.4) (0.4)--------------------- ------- ------- ------ ------- ---------Balance at 30September 2006 0.5 62.4 8.9 (106.8) (35.0)--------------------- ------- ------- ------ ------- --------- --------------------- ------- ------- ------ ------- --------- Share Retained Equity Share premium Merger (loss) / shareholders' capital account reserve earnings (deficit)/funds £m £m £m £m £m--------------------- ------- ------- ------ ------- ---------Balance at 1 April2006 0.5 62.4 8.9 (107.9) (36.1)Loss for the period - - - (57.3) (57.3)Dividends - - - (17.7) (17.7)Actuarial gain onretirement benefitliabilities (note13) - - - 21.7 21.7Share-basedmovements - - - 5.9 5.9Employee BenefitTrusts - - - 0.1 0.1Share of JointVenture financialderivatives - - - 7.5 7.5Net differences onexchange - - - (0.2) (0.2)--------------------- ------- ------- ------ ------- ---------Balance at 31 March2007 0.5 62.4 8.9 (147.9) (76.1)--------------------- ------- ------- ------ ------- --------- The amounts above are shown net of taxation. 16. Cash generated from / (used in) continuing operations ----------------------------- -------- -------- -------- Six months Six months Year to to 30 Sept to 30 Sept 31 March 2007 2006 2007 £m £m £m----------------------------- -------- -------- -------- Profit for the period from continuingoperations 31.7 21.1 54.9Adjustments for:Income tax 11.0 8.2 15.2Finance income (note 6) (5.0) (4.1) (9.0)Finance cost (note 6) 2.7 2.5 5.4Share of post-tax profits from JointVentures (0.3) (0.4) (2.8)Depreciation charges 9.8 8.8 18.8Amortisation of software intangibleassets 4.2 5.4 10.9Amortisation of acquisition intangibleassets 0.5 0.2 0.6Release of deferred income (2.0) (0.1) (0.2)Share based payment charge 2.7 2.4 5.1Profit on disposal of property, plant andequipment (0.2) - (0.1)Movement in provisions (2.7) (1.3) 8.5Movement in pensions (20.7) (10.1) (20.9)Movement in working capital (48.5) (41.9) 7.5----------------------------- -------- -------- --------Cash (used in)/generated from continuingoperations (16.8) (9.3) 93.9----------------------------- -------- -------- -------- 17. Business combinations On 5 September 2007 the Group acquired 100% of the share capital of IntelligentSpace Partnership Limited, an English registered entity, for a deferredconsideration in loan notes with a present value of £2.3m Fuller disclosures in respect of business combinations will be provided in theGroup's financial statements for the year ended 31 March 2008. 18. Related party transactions Details of the directors' shareholdings, share options and remuneration aredisclosed in the Annual Report. It is not considered meaningful to disclose thisinformation at the half year. Transactions with the retirement benefit schemes are disclosed in note 13. The Group entered into a number of transactions with its Joint Ventures duringthe period. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ATK.L