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Growing order book lifts Atkins

RESULTS: Consultant engineer WS Atkins delivered a solid set of results with a nice dividend boost, but it's the growing order book that has shares rising 4 per cent.
June 14, 2012

Shares in consultant engineer WS Atkins edged up 4 per cent in a falling market as management's confident outlook was underlined by work in hand guaranteeing 60 per cent of revenues for the current year, up 5 percentage points at this stage 12 months ago. Moreover, based on broker N+1 Brewin's adjusted pre-tax profit estimate of £106.6m, giving EPS of 82.2p (2012: 78.9p), investors can expect some modest earnings growth after underlying profits held steady at £102m mainly due to weakness in the UK.

IC TIP: Buy at 702p

The UK operation struggled from a hiatus in new government work, causing operating profits to fall 16 per cent to £51.6m on revenues down 7 per cent to £860m, but the outlook is improving. Rail projects are finally coming through and work in hand now accounts for almost two thirds of revenues, up from 56.5 per cent 12 months ago. The profit shortfall was partly made up by the North American operations as a full-year contribution from PBSJ – acquired in October 2010 – helped drive both revenue and profits in the region up by over 50 per cent. Acquisitions also benefited the group's energy consultancy business, but the underlying business remains strong with both margins and order intake continuing to rise.

Reported group profits in our table are flattered by one-off gains of £33.9m, largely related to a pension credit.

WS ATKINS (ATK)

ORD PRICE:702pMARKET VALUE:£733m
TOUCH:701-702.5p12-MONTH HIGH:816pLOW: 481p
DIVIDEND YIELD:4.3%PE RATIO:6
NET ASSET VALUE:114p*NET CASH:£123m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20081.3191.967.924.0
20091.49102.786.126.0
20101.3996.679.527.5
20111.5691.074.329.0
20121.71135.5109.030.5
% change+10+49+47+5

Ex-div: 25 Jul

Payment: 31 Aug

*Includes intangible assets of £251m, or 241p per share.