WS Atkins (ATK) generates more than two-thirds of its revenue in North America, the UK and Europe, so the growing pressure for new infrastructure projects in these geographies makes for a positive outlook. That said, the first six months of the current financial year have not been plain sailing. If you strip out the currency translation boost in the statutory figures, like-for-like revenues fell 2.4 per cent due to flat UK and Europe sales and tougher conditions in the Middle East and energy divisions. Still, ignoring a raft of exceptional items, marginal gains helped underlying operating profit rise 3.9 per cent at constant currencies to £65.3m.
Improving efficiencies in the UK and Europe sent operating margins here up 2.2 percentage points to 8.7 per cent - comfortably ahead of the group's 8 per cent target. As a result, operating profits rose by almost a third, despite a slight dip in the top line. Chief executive Uwe Krueger is confident about prospects for this division, which has heavy biases to transport and other infrastructure. "We'd like to see the government continue its steadfast backing of big infrastructure projects," he said in reference to this week's Autumn Statement.
The political story is similar across the pond. Although Atkins currently only has a small slice of the US market, President-elect Trump's grand plans suggest there could be more to go around. The group increased its US headcount by nearly 100 people in the period to help deliver on two big contracts. Operating profit rose 80 per cent to £15.3m.
The Middle East and energy divisions have both struggled against recent oil price weakness. However, the latter reported a 58 per cent upswing in revenues thanks to a £58m contribution from its acquisition of nuclear services business PP&T. But impairments associated with that acquisition and an underperforming oil and gas business added £37.2m of one-off costs, which largely explains the hit to pre-tax profits. On an underlying basis, pre-tax profits actually rose 14 per cent to £63.6m.
Broker Numis expects adjusted pre-tax profit and EPS of £157m and 118p for the year to March 2017 (up from £139m and 107p in FY2016).
WS ATKINS (ATK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,647p | MARKET VALUE: | £1.65bn | |
| TOUCH: | 1645-1647 | 12-MONTH HIGH / LOW: | 1,750p | 1,110p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 186p* | NET DEBT: | 49% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 905 | 53.8 | 44.1 | 11.7 |
| 2016 | 995 | 22.4 | 23.1 | 12.5 |
| % change | +10 | -58 | -48 | +7 |
Ex-div: 24 Nov Payment: 6 Jan *Includes intangible assets of £569m, or 569p a share | ||||
