The impact of UK public sector cuts, many of which will be implemented over the coming year, remain the principal cause of concern for engineering and design consultancy WS Atkins. But while new sources of public sector revenue will be constrained, a resilient first-half performance does provide grounds for optimism.
In recognition of the difficult trading environment, management has continued to pare back costs. Average staff numbers were cut by 8.6 per cent, although the benefit to the bottom-line isn't immediately obvious; headline pre-tax profits were well down on the comparable figure in 2009, but last year's half-year figures benefited from a one-off curtailment gain of £2.6m in respect of the Railway's Pension Scheme. Take this gain into consideration, along with the £3m transaction costs for October's acquisition of US consultancy PBSJ, and underlying pre-tax profits actually rose 2 per cent to £41.7m. On the same basis, comparable operating margins increased from 6.9 to 7.3 per cent.
The $280m (£175m) acquisition of PBSJ has effectively cut the UK's proportion of group revenues by around a third to 54 per cent and, according to finance director Heath Drewett, the deal forms part of a wider strategy "to diversify earnings geographically and target specific revenue streams".
JPMorgan Cazenove forecasts adjusted full-year pre-tax profits of £93m and EPS of 73.3p (from £97m and 79.4p in 2010).
| WS ATKINS (ATK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 718p | MARKET VALUE: | £718m | |
| TOUCH: | 715-720p | 12-MONTH HIGH: | 801p | LOW: 549p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 7 | |
| NET ASSET VALUE: | * | NET CASH: | £279m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 701 | 43.5 | 34.8 | 9.25 |
| 2010 | 664 | 38.7 | 30.2 | 9.50 |
| % change | -5 | -11 | -13 | +3 |
Ex-div: 22 Dec Payment: 28 Jan *Negative shareholders' equity | ||||
