WS Atkins plc Preliminary results for the year ended 31 March 2016 16 June 2016 1
Uwe Krueger Chief executive officer 2
Delivering the strategy Strong performance, 8% margin target achieved and PP&T nuclear acquisition completed Financial highlights • Revenue up 6.0% to £1.86bn • Underlying operating profit up 10.5%, 8.0% margin target achieved • Underlying profit before tax of £139.0m, ahead of market expectations • Underlying diluted EPS up 10.5%, full year dividend up 8.2% • Strong balance sheet with net funds of £191.7m at 31 March 2016 Operational highlights • Significant improvement in UK and Europe performance • Two recent major transportation project wins in North America underpin workload into the new financial year • Strong performance in Middle East driven by the Central Planning Office in Qatar and peak delivery on metro projects • In Asia Pacific we continue to pursue outbound investment opportunities with selected Chinese contractors • Difficult year for Energy, although good growth in nuclear, power and renewables • PP&T nuclear acquisition completed in April 2016. 3
Heath Drewett Group finance director 4
Financial summary 2016 2015 Revenue £1,862m £1,757m 6.0% Operating profit £143.4m £118.5m 21.0% Operating margin 7.7% 6.7% 100bp Underlying operating profit £148.2m £134.1m 10.5% Underlying operating margin 8.0% 7.6% 40bp Underlying profit before tax £139.0m £121.9m 14.0% Underlying diluted EPS 107.3p 97.1p 10.5% Dividend per share 39.5p 36.5p 8.2% Work in hand 44% 51% Average staff numbers 18,416 17,898 2.9% Closing staff numbers 18,052 18,462 (2.2)% Net funds £191.7 m £179.3 m 5
UK and Europe Significantly improved performance 31 March 2016 31 March 2015 943.6 903.8 4.4% Revenue (£m) 73.8 60.7 21.6% Operating profit (£m) 7.8% 6.7% 110bp Operating margin 9,707 9,405 3.2% Average staff numbers 9,591 9,642 (0.5)% Closing staff numbers • Good growth reflecting the Group’s strong position in a well -funded infrastructure market across rail, highways, water, education and airports • Operating performance significantly improved against a prior year impacted by market downturn in aerospace and rail contract negotiations • Simplifying the UK organisational structure has supported the year on year margin progress. Water, ground and environment and design and engineering businesses brought together 1 April 2016 • UK Government infrastructure spend continues to provide an attractive pipeline of opportunities. 6
North America Transitional year with two major project wins 31 March 2016 31 March 2015 362.6 341.4 6.2% Revenue (£m) 20.4 20.0 2.0% Operating profit (£m) 5.6% 5.9% (30)bp Operating margin 2,754 2,794 (1.4)% Average staff numbers 2,747 2,735 0.4% Closing staff numbers • Our North American business continues to operate in stable infrastructure markets • Investment in major project bids impacted margin, particularly in the first half • Two significant wins in the second half: Project NEON (for Nevada Department of Transportation) and Purple Line (light rail project in Maryland) underpins current year workload • Revenue and margin progress expected in FY17, though infrastructure spend under the FAST Act not expected to pick up until post the Presidential election. 7
Middle East Metro projects drive strong performance 31 March 2016 31 March 2015 248.3 216.7 14.6% Revenue (£m) 29.5 22.5 31.1% Operating profit (£m) 11.9% 10.4% 150bp Operating margin 2,580 2,421 6.6% Average staff numbers 2,459 2,668 (7.8)% Closing staff numbers • Revenue and operating profit growth driven by strong performance on metro projects and the Central Planning Office project in Doha • Continued client caution around project commitments, particularly in property and infrastructure • Rail and infrastructure businesses combined as we focus on key areas for investment and on driving operational efficiency in more testing markets • Geographic expansion supported by agreement to acquire Howard Humphreys, a multi disciplinary consultancy in East Africa with a strong track record in transportation, water and property. 8
Asia Pacific Positioning for long term growth 31 March 2016 31 March 2015 106.1 109.7 (3.3)% Revenue (£m) 8.5 9.8 (13.3)% Operating profit (£m) 8.0 % 8.9% (90)bp Operating margin 1,448 1,561 (7.2)% Average staff numbers 1,354 1,523 (11.1)% Closing staff numbers • Performance in the year reflects the slowdown in mainland China and delays in the start of some key opportunities • Some progress made in SE Asia where we continue to invest for growth • Continue to pursue outbound investment opportunities with selected Chinese contractors • Operational efficiency targeted with the combination of our architecture, landscape and urban planning into a property consultancy business • Immediate outlook remains stable, and the region continues to offer attractive, medium term growth. 9
Energy Resilience from a diversified portfolio 31 March 2016 31 March 2015 201.3 182.0 10.6% Revenue (£m) 16.7 20.4 (18.1)% Operating profit (£m) 8.3% 11.2% (290)bp Operating margin 1,840 1,633 12.7% Average staff numbers 1,806 1,813 (0.4)% Closing staff numbers • Organic revenue growth of 2.3% • Oil and gas (O&G) markets difficult, particularly in North America where we are more exposed to capital expenditure budgets • Middle East O&G market has grown and we are seeking to establish a new joint venture in the Kingdom of Saudi Arabia • Good growth in our nuclear, power and renewables businesses • Regulatory clearance now received for PP&T acquisition which significantly enhances the scale and capability of our nuclear business. 10
Cashflow Good control of working capital (£m) 31 March 2016 31 March 2015 148.2 134.1 Underlying operating profit 23.8 22.4 Depreciation/amortisation (23.6) 11.3 Working capital (19.8) (25.2) Net capital expenditure 9.9 11.5 Provisions/other 138.5 154.1 Underlying operating cash flow 93% 115% Cash conversion • Working capital outflow reflects a growing business and extended payment profile in the Middle East, against a strong prior year comparator • Provisions/other includes share based payment charge • Closing net funds of £191.7m (March 2015: £179.3m). 11
Pension Good asset performance helps reduce deficit • £216m IAS 19 deficit net of deferred IAS19 deficit net of deferred tax (£m) tax at 31 March 2016 (March 2015: £238m) 263 258 • Good asset performance and discount 238 235 rate flat at 3.5% 217 216 215 • Deficit repayment of £32.8m in 2015/16, escalating at 2.5% per annum • Triennial valuation as at March 2016. Mar 2013* Sep 2013* Mar 2014 Sep 2014 Mar 2015 Sep 2015 Mar 2016 * Restated for IAS19 revision 12
Summary Delivering the strategy • Strong results, 8% operating margin achieved and a good cash performance • PP&T nuclear acquisition now being integrated, enhancing nuclear capabilities • Overall, we remain confident for the year ahead despite continued uncertainty in some of our markets. 13
Uwe Krueger Chief executive officer 14
Strategic progress Financial delivery • Three pillar strategy is delivering: operational excellence, portfolio optimisation and sector/regional focus • Operational excellence focused on margin improvement and cash generation • TSR of 132% over five year period. Underlying operating margin (%) Cash flow conversion* (%) 150% 8.0 8.0 7.5 7.6 7.0 115% 100% 6.5 6.7 95% 93% 6.5 6.4 6.0 73% 68% 5.5 50% 5.0 4.5 0% 4.0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 15 * Underlying operating cash flow/underlying operating profit 15
Creating shareholder value Underlying diluted EPS growth Consistent dividend growth 8.0% 6.7% 100.0 40.0 107.3 97.1 39.5 90.0 36.5 85.7 80.0 33.75 82.6 pence pence 32.0 79.0 30.0 30.5 70.0 60.0 20.0 50.0 40.0 30.0 10.0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 16
Improving the quality of earnings Operational excellence • Phase II of streamlined organisational structure in UK • New operating model in North America – Technical Professional Organisation • Focus sectors and geographies in Middle East Portfolio optimisation • Highways services business in UK • Peter Brown construction management at risk in North America • Sub-scale businesses in Poland and Portugal. 17
Sector focus growth Energy Revenue CAGR Operating profit CAGR £m £m 250 40 11.9% to FY16 35 200 30 10.0% to FY16 25 150 20 100 15 10 50 5 0 0 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 • Focused investment, both organic and inorganic, since 2012 • Significant increase expected in FY17 following PP&T acquisition. 18
Skills and geographies enhanced Nuclear Terramar Safety Associates PP&T Houston Howard Offshore Humphreys Engineering Confluence • Significantly strengthened nuclear and programme management capabilities • SE Asia, Africa and Norway. 19
Looking forward 20
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