WS Atkins plc Half year results for the six months ended 30 - PowerPoint PPT Presentation

WS Atkins plc Half year results for the six months ended 30 September 2014 13 November 2014

Uwe Krueger Chief executive officer

Good results despite currency headwinds Strong performance in Middle East and Energy • Revenue up 2% excluding effects of currency, acquisitions and disposals • Underlying profit before tax up 5% • Underlying operating margin of 6.4%, up 90 basis points year on year • Mixed UK and improving North American performance • Strong financial position with net funds of £155.3m • Interim dividend increased by 4.8% to 11.0p • Outlook for the full year unchanged. 3

Heath Drewett Group finance director

Financial summary 30 Sep 2014 30 Sep 2013 Revenue £831.4 m £915.4 m (9.2) % Operating profit £44.6 m £49.7 m (10.3) % Operating margin 5.4 % 5.4 % - bp Underlying operating profit £53.0 m £50.7 m 4.5 % Underlying operating margin 6.4 % 5.5 % 90 bp Underlying profit before tax £46.9 m £44.7 m 4.9 % Underlying diluted EPS 37.7 p 35.9 p 5.0 % Dividend per share 11.0 p 10.5 p 4.8 % Work in hand 89.1 % 87.7 % Average staff numbers 17,569 17,715 (0.8) % Net funds £155.3 m £136.1 m 30 Sep 2014 31 Mar 2014 Closing staff numbers 2.3 % 17,898 17,489 5

Segmental summary Operating Operating Revenue £m profit/(loss) margin UK and Europe 428 22.4 5.2 % North America 171 10.2 6.0 % Middle East 96 8.9 9.3 % Asia Pacific 53 3.5 6.6 % Energy 81 8.1 10.0 % Total for segments 829 53.1 6.4 % Joint ventures included above - Total before unallocated items 829 53.1 6.4 % Unallocated central items 2 (8.5) Total for Group 831 44.6 5.4 % 6

UK and Europe Mixed performance 30 Sep 2014 30 Sep 2013 Revenue (£m) 428.3 525.4 (18.5) % Operating profit (£m) 22.4 27.7 (19.1) % Operating margin 5.2 % 5.3 % (10) bp Work in hand 85 % 87 % Average staff numbers 9,335 9,924 (5.9) % 30 Sep 2014 31 Mar 2014 Closing staff numbers 9,414 (1.4) % 9,544 7

UK Mixed trading 30 Sep 2014 30 Sep 2013 Revenue (£m) 398.5 488.4 (18.4) % Operating profit (£m) 22.7 26.2 (13.4) % Operating margin 5.7 % 5.4 % 30 bp Work in hand 86 % 88 % Average staff numbers 8,610 9,184 (6.3) % 30 Sep 2014 31 Mar 2014 Closing staff numbers 8,737 8,810 (0.8) % • Revenue in continuing businesses down 4% (excluding highways services revenue of £73.7m in prior year) and operating profit down 8.5%, against a strong first half comparator • Market downturn in aerospace and outstanding contract variations in rail impacting margin performance • Our highways and design and engineering businesses have performed well, driven by continuing investment in infrastructure by the UK Government • Next phase of operational excellence announced, including reorganisation 8 of our six businesses.

North America Improved performance 30 Sep 2014 30 Sep 2013 Revenue (£m) 170.5 205.4 (17.0) % Operating profit (£m) 10.2 8.4 21.4 % Operating margin 6.0 % 4.1 % 190 bp Work in hand 93 % 91 % Average staff numbers 2,823 3,016 (6.4) % 30 Sep 2014 31 Mar 2014 Closing staff numbers 2,786 2,836 (1.8) % • Revenue reduction reflects currency effects (£15m) and the sale of Peter Brown (£7m) • Operating profit performance benefited from disposal of loss making Peter Brown business • Margin improvement in consultancy, particularly good returns in Department of Transportation work • Focus around five market facing businesses and a streamlined organisational structure expected to deliver further operating margin improvements. 9

North America analysis Progress despite currency headwinds 30 Sep 2014 30 Sep 2013 Revenue (£m) Consultancy 137.5 164.1 Peter Brown - 6.9 Faithful+Gould 33.0 34.4 North America 170.5 205.4 Operating profit/(loss) (£m) Consultancy 8.4 9.4 Margin 6.1% 5.7% Peter Brown - (3.3) Faithful+Gould 1.8 2.3 Margin 5.5% 6.7% North America 10.2 8.4 10 Margin (%) 6.0% 4.1%

Middle East Strong first half performance 30 Sep 2014 30 Sep 2013 Revenue (£m) 96.0 82.6 16.2 % Operating profit (£m) 8.9 4.2 112 % Operating margin 9.3 % 5.1 % 420 bp Work in hand 97 % 90 % Average staff numbers 2,288 1,979 15.6 % 30 Sep 2014 31 Mar 2014 Closing staff numbers 2,428 2,071 17.2 % • Focus remains on three key markets: UAE, Qatar and Kingdom of Saudi Arabia and three sectors: rail, infrastructure and property • Significant performance improvement driven by major metro project wins and improving property market in the UAE • Strong pipeline of future project opportunities. 11

Asia Pacific Good consultancy performance 30 Sep 2014 30 Sep 2013 Revenue (£m) 53.4 49.2 8.5 % Operating profit (£m) 3.5 3.4 2.9 % Operating margin 6.6 % 6.9 % (30) bp Work in hand 92 % 93 % Average staff numbers 1,542 1,317 17.1 % 30 Sep 2014 31 Mar 2014 Closing staff numbers 1,566 1,498 4.5 % • Revenue growth includes Confluence acquisition in October 2013 • Margin dilution reflects further investment in diversification in the region and mainland China slowdown • Positive second half outlook despite mainland China slowdown and risk of project delays in Hong Kong. 12

Energy Strong first half performance 30 Sep 2014 30 Sep 2013 Revenue (£m) 81.3 83.4 (2.5) % Operating profit (£m) 8.1 6.4 26.6 % Operating margin 10.0 % 7.7 % 230 bp Work in hand 80 % 78 % Average staff numbers 1,499 1,401 7.0 % 30 Sep 2014 31 Mar 2014 Closing staff numbers 1,616 1,461 10.6 % • Strong profit growth, in part due to impact of bid costs in prior year • Nuclear Safety Associates acquisition achieved regulatory approval • Looking ahead, attractive pipeline and international growth underpinned further by recent Houston Offshore Engineering acquisition. 13

Cash flow £m 30 Sep 2014 30 Sep 2013 Operating profit 44.6 49.7 Depreciation/amortisation 11.6 11.4 Impairment of goodwill 2.8 - Working capital (35.6) (33.5) Pension (16.0) (16.0) Other 6.1 (2.0) Cash flow from operating activities 13.5 9.6 • Working capital performance reflects increasing lock-up in the UK • Cash flow targets embedded in management incentive schemes • Net funds at 30 September of £155.3m (Sep 2013: £136.1m). 14

Working capital First half increase driven by lock-up D 30 Sep 2014 31 Mar 2014 2014 2012 £m £m Trade receivables 300.6 281.9 Operating profit 104.1 Amounts recoverable on contracts 125.3 93.2 Depreciation/amortisation 28.6 Fees invoiced in advance (175.2) (155.5) Working capital (27.0) Lock-up 250.7 219.6 (31.1) Pension (21.0) Other receivables/prepayments 46.9 43.0 (3.9) Provisions/other (1.8) Trade payables (70.6) (63.1) 7.5 Cash flow from operating activities 82.9 Other payables/accruals (232.7) (234.5) (1.8) Other (6.3) Movement in working capital (35.6) 15

Pension Improved asset performance • £235m IAS 19 deficit net of IAS19 deficit net of deferred tax (£m) deferred tax at 30 Sept 2014 (March 2014: £258m) 342 • Strong asset and liability 317 hedging programme 263 performance offsetting 258 249 242 235 impact of falling 217 206 interest/discount rates 187 • Deficit repayment of £32m in current year, thereafter escalating at 2.5% per annum. Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep 2010 2010 2011 2011 2012 2012* 2013* 2013* 2014 2014 * Restated for IAS19 revision 16

Summary • Good first half performance • Delivery of strategy continues • Outlook for the remainder of 2014/15 is for continued underlying growth and performance in line with expectations. 17

Uwe Krueger Chief executive officer

Our strategy First half progress update Positives • Operational excellence remains a priority as we drive margin improvement towards our 8% goal • Portfolio optimisation continues with the sale of our Polish business • Ongoing growth in Energy, with skills added through NSA and HOE acquisitions • Focused approach delivering strong results in the Middle East • Strong financial position with net funds of £155m at September 2014 Challenges • Resolving UK rail contract variations • Reduced demand in aerospace market. 19

Acquisition strategy Disciplined approach • Organic growth remains our priority, augmented by appropriate M&A • Focused on additional skills and/or geographic presence • Cultural fit is critical • Primarily expected to be ‘bolt - on’ in terms of scale • Given the Group’s financial position, more significant opportunities will also be considered • Dedicated central team to identify targets and support execution/implementation. 20

Creating a differentiated offering Clients Increased client intimacy and focus External alliances and internal Collaboration cooperation Technology/ innovation Driving advances in design and engineering of projects. 21

Our clients Increasing focus • Thought leadership – a real differentiator eg Future Proofing Cities, Central planning office, Qatar • Key account management and CRM tools • target and prioritise key clients • a systematic approach to business development (Miller Heiman) • Selling our Group wide skillbase eg EDF • Agility – responding to changing markets • Potential co-investments. 22