18th Apr 2007 07:01
Atkins (WS) PLC18 April 2007 WS Atkins plc Trading Update WS Atkins plc ('Atkins' or 'the Group'), the multi-disciplinary consultancygroup, is today providing an update on trading in advance of publishing itsresults for the year ended 31 March 2007 on 26 June 2007. Overall, the Group has performed well and the profit before tax and exceptionalitems for the year ended 31 March 2007 is anticipated to be significantly aheadof expectations. With our continued focus on staff recruitment and retention,our staff numbers have increased to approximately 16,600 at 31 March 2007, 1,700higher than last year and in line with our expectations. Furthermore, cashgeneration has been strong with net funds at 31 March 2007 expected to beapproximately £185 million. The results for the year are, however, anticipated to be impacted by anexceptional loss of £36 million in relation to the Metronet Enterprise. BUSINESS SEGMENTS The Design and Engineering Solutions segment has performed well with furthergrowth in headcount and good contract wins across all areas, especially in ourWater, Defence, and Nuclear markets. The acquisition of MSL in March 2006 hasbeen successfully integrated and is delivering results ahead of our initialexpectations and the recent acquisitions of Advantage Business Group and Boreasoffer good opportunities for growth in strong targeted markets. Our Rail business has seen a recovery in its workload from its key client,Network Rail, and is well advanced on the delivery of its two major contracts,Port Talbot and Basingstoke re-signalling. In the last six months, the businesshas won a number of significant contracts, including the re-signalling of Rugbyand Nuneaton. The performance of our Highways and Transportation segment has, as predicted,recovered from the slow start to the year and is expected to exceedexpectations. This improvement comes from the strong performance from ourHighways Services contracts, where we will continue to benefit from an extensionto our Northampton County Council contract to 31 March 2008, and improvedmargins from our Planning and Design businesses. The Middle East and China segment has continued to grow strongly and hassignificantly exceeded our expectations. The growth in the Middle East regionhas continued, with staff numbers now approximately 1,700. This growth has beenunderpinned by a number of significant contracts wins, including the design ofthe Red and Green Lines of Dubai Metro and Trump Tower, amongst othersignificant projects. Our China business continues to trade profitably. The Management and Project Services segment has performed in line withexpectations with Faithful+Gould continuing to grow its US business, which nowhas over 500 staff. The integration of Mantix, which was acquired in June 2006,and the re-organisation within our Management Consultants business has, aspredicted, adversely impacted the results of this segment. The results of our Equity Investments segment relate primarily to Lambert SmithHampton. This business has continued to benefit from the strong property marketand has performed well this year. With respect to the Metronet Enterprise, the continued delays in and higher thananticipated costs of the capital programme, combined with uncertainties aroundthe recoverability of additional costs, leads the Board to expect that anexceptional loss before tax of approximately £36 million (after JV tax) will beincluded in the Group's results for the year ended 31 March 2007. This exceptional loss will be reflected in the Group's Joint Ventures, Metronetand Trans4m, and within the Group's business segments. The overall cash impactof this exceptional loss is expected to be approximately £50 million in the yearto March 2008, of which approximately £30 million was provided for at 31 March2006. Metronet exceptional loss (£31.6 million before JV tax; £21.3 million after JVtax) Atkins has a 20% shareholding in the Metronet PPP companies. Metronet'sday-to-day operating performance in the second half of the year has beenvariable and the costs of delivering its capital programme, including for thestations, are expected to be greater than originally anticipated. Many of theseadditional costs may, in the long-term, be recoverable if incurred in an "Economic and Efficient" manner but at this stage it is not clear how much ofthese additional costs will be borne by Metronet. As a result of this increasein costs, Metronet has accelerated the equity contributions from itsshareholders and the Group injected £12.7 million in the second half of theyear, bringing the Group's investment in Metronet to £50.7 million. The Grouphas commitments for further equity contributions of £19.3 million, which mayalso be accelerated and injected this year, to take its total investment to £70million. Given the current uncertainties associated with Metronet, it is expected that anexceptional loss of £21.3 million (after JV tax) will be included in the resultsfor the year ended 31 March 2007. This has no cash impact but reduces thecarrying value of the Group's investment in Metronet to the par value of theinvestment made to date. Trans4m exceptional loss (£14.5 million before JV tax; £11 million after JV tax) Atkins is a 25% shareholder in Trans4m, the contracting Joint Venture whichcarries out the stations improvement programme. There has been some progress inthe delivery of station improvements by Trans4m during the year. However, thecost of this work has risen significantly. Consequently, it is anticipated thatthe Group's results will include an exceptional loss of approximately £11million (after JV tax) from Trans4m. The cash impact of this loss is expectedto be approximately £15 million, primarily impacting the financial year ending31 March 2008. Group's business segments exceptional loss (£4 million) Trans4m has also recently started a process of awarding station improvementcontracts to companies outside its tied supply chain. As a result there will bea lower amount of future revenue on this contract to enable the recovery ofcosts. Consequently it is expected that the Group's business segments,principally Rail, will include an exceptional loss of approximately £4 million.It is anticipated that there will be an associated cash outflow of around £35million during the year ending 31 March 2008 in settlement of this loss andpreviously accounted for liabilities. TAX The Group's earnings are expected to benefit from a reduction in the Group's taxcharge of £4 million as agreement has been reached over its claim for Researchand Development tax credits over the last three years. OUTLOOK The Group's order book remains strong and with opportunities in all of our keymarkets, we are confident that the Group can make good progress in 2007/08. 18 April 2007 ENQUIRIES:Atkins Tel: 01372 726140 Keith Clarke, Chief ExecutiveRobert MacLeod, Group Finance Director Note: Conference Call Robert MacLeod will be hosting a conference call for investors and analysts at8:30am today to review this trading statement. For dial-in details, pleasecontact Laura Gates at Brunswick on: 020 7396 3569. A recording of the conference call will also be available on the company'swebsite www.atkinsglobal.com from 2.00pm today. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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