Why Atkins hopes for Acuity on the infrastructure front

In our January tip, we warned that the group faced challenges in some locales, most notably the Asia-Pacific region, and while these results bear this out, it's clear that Atkins is well insulated through the strength of its balance sheet. Cash generation remains strong, so the engineering and project management consultancy exited the period with net funds of £192m. Atkins also managed to reduce its pension deficit on an accounting basis by 11 per cent to £265m, albeit on the back of asset gains and changed economic assumptions.

Asia-Pacific performance was hit by delays to the start of a number of projects and receipts from clients beyond agreed contract terms. And, with one eye on costs, headcount in the Middle East and Asia Pacific was reduced through the sale of a subsidiary in Portugal. Management was satisfied with the overall level of trading in the Middle East, driven by the Central Planning Office project in Qatar, although increased liquidity pressures were highlighted as a result of weak oil prices.

Perhaps the most noteworthy developments in Atkins' overseas markets came stateside, where the group was appointed to Project NEON for the Nevada Department of Transportation and the Purple Line light rail project in Maryland, and said the latest US five-year Transportation Bill "should provide greater pipeline visibility".

Atkins' domestic market is holding up well, perhaps with the exception of its aerospace business. Activity in the infrastructure market remains encouraging despite the strain on government finances, with rail, road and water projects "well funded".

Prior to these figures JPMorgan Cazenove was expecting adjusted profits of £166m for the March 2017 year-end, leading to EPS of 121p (from £146m and 100p in FY2016).