M25 and Olympics work keeping WS Atkins on track through recession

Updated: 06:10 EST, 25 November 2009

Engineering consultancy WS Atkins said it expects a good second half to the year after cost cuts and a solid first half performance boosted by its work on the M25 and Olympics sites.

Its shares shot up more than 9 per cent today.

The firm, which provides architectural, design and construction services, increased operating profit by 6 per cent for the six months to the end of September, boosted margins and reported strong cash generation.

The interim dividend was increased by 6 per cent to 9.25 pence per share and the company said it had strong work in hand, with 90 per cent of forecast revenues for the year now secured.

Contracts on the Olympics sites and M25 are a big boost for WS Atkins

Results benefitted from a solid performance not only at its Highways and Transportation unit in Britain but also strength in China and an improved picture at its Asset Management division, which offset some weakness in Design and Engineering.

WS Atkins reported first-half operating profits up 6 per cent at £51million.

The group, which has worked on projects as diverse as Dubai's seven star Burj Al Arab Hotel and Britain's London Olympics development, posted revenues down 1 per cent at £701million, despite staff numbers being down 4 per cent.

'Our performance over the six months demonstrates our ability to respond quickly to changes in the marketplace and to flex our resources to meet expected demand,' Chief Executive Keith Clarke said in a statement.

The group said it had reduced headcount to 16,235 from 18,017 in March and Drewett said he expected this number to fall below 16,000 by next year. 

Finance Director Heath Drewett said the group had also seen improvements in liquidity in the Middle East but said he thought overall the industry was still 'bouncing along the bottom' of the downturn.

Shares in the company were up 9.04 per cent at 609 pence at 0928 GMT, the top climber in the FTSE Mid 250 index, valuing the group at £600million.

Analysts welcomed the results but noted that the outlook for future years is complicated by the expectation that a future British government will cut back on infrastructure spending.

'The results came in at the upper end of expectations,' Altium Securities said in a note.

'Atkins has secured 90 percent of the current year revenue forecasts, so earnings risk is highly limited for the balance of this year.

'But the outlook for full-year 2011 and full-year 2012 is increasingly uncertain due to political uncertainty over the timing and nature of revised infrastructure programmes post election.

'We are therefore not changing our full-year 2011 estimates at this stage.'