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 2016

17 November 2016

1

Uwe Krueger

Chief executive officer

2

Underlying profit before tax up 14%

Financial highlights

• Revenue up 10.0% to £995m, 4.0% on a constant currency basis
• Underlying operating profit up 10.7%, constant currency underlying operating profit up 4.3%
• Underlying profit before tax of £63.6m, up 14%
• Underlying diluted EPS up 12.6%, interim dividend up 6.8%
• Net borrowings of £90.3m at September 2016, following PP&T acquisition.

Operational summary

• Significant increase in UK and Europe operating profit, up 32%, supported by strong markets and

improved operational delivery

• Good first half performance in North America, underpinned by two major transportation projects
• Middle East impacted by more difficult transportation and infrastructure markets and demobilisation
• f metro projects; good wins in Dubai property market
• Energy business continues to face challenging market conditions in oil and gas, North American oil

and gas impairment of £23.3m in the period

• First major PP&T project in US (DUF6) secured and integration progressing well.

3

Good overall performance, particularly in UK and North America

Heath Drewett

Group finance director

4

Financial summary

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30 Sep 2016 30 Sep 2015 Revenue £994.7 m £904.6 m 10.0 % Underlying operating profit £65.3 m £59.0 m 10.7 % Underlying operating margin 6.6 % 6.5 % 10 bp Underlying profit before tax £63.6 m £55.8 m 14.0 % Underlying diluted EPS 48.2 p 42.8 p 12.6 % Dividend per share 12.5 p 11.7 p 6.8 % Work in hand 84 % 84 % Average staff numbers 18,335 18,506 (0.9 )% Net (debt)/ funds £(90.3 )m £141.1 m 30 Sep 2016 31 Mar 2016 Closing staff numbers 18,339 18,052

Segmental summary

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£m Revenue Operating profit/ (loss) Operating margin UK and Europe 451 39.4 8.7 % North America 222 15.3 6.9 % Middle East 105 6.6 6.3 % Asia Pacific 57 4.1 7.2 % Energy 155 8.4 5.4 % Total for segments 990 73.8 7.5 % Joint ventures included above (4.9 ) Acuity 5 (3.6 ) Total for the Group 995 65.3

UK and Europe

• Good performance reflecting the Group’s strong position in a well-funded infrastructure market

across highways, rail, energy, education and defence/security

• Operating performance enhanced by improved project delivery and further organisational change
• Minimal impact to date of the EU Referendum result on our highly diversified business
• Positive outlook into the second half.

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30 Sep 2016 30 Sep 2015 change

Revenue (£m)

451.2 458.7 (1.6 )%

Operating profit (£m)

39.4 29.8 32.2 %

Operating margin

8.7 % 6.5 % 220 bp

Average staff numbers

9,360 9,724 (3.7 )% 30 Sep 2016 31 Mar 2016

Closing staff numbers

9,274 9,591 (3.3 )%

Strong profit and margin growth

North America

• Constant currency revenue up 10% and operating profit up 62%
• Major projects: NEON (for Nevada Department of Transportation) and Purple Line (light rail project

in Maryland) delivering well

• Focus remains on securing replacement contract opportunities as current major projects demobilise
• Full year expected to deliver good year on year revenue and margin growth.

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30 Sep 2016 30 Sep 2015 change

Revenue (£m)

221.9 177.7 24.9 %

Operating profit (£m)

15.3 8.5 80.0 %

Operating margin

6.9 % 4.8 % 210 bp

Average staff numbers

2,780 2,759 0.8 % 30 Sep 2016 31 Mar 2016

Closing staff numbers

2,849 2,747 3.7 %

Good first half, supported by major project delivery

Middle East

• Revenue and operating profit performance reflects government spending constraints, workload

shortfalls and our conservative debt provisioning, against a strong prior year comparator

• Our combined rail and infrastructure businesses are experiencing increased client caution

around major project commitments

• Dubai property team busy following a number of recent wins
• Geographic expansion into East Africa through Howard Humphreys acquisition.

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30 Sep 2016 30 Sep 2015 change

Revenue (£m)

104.9 118.8 (11.7 )%

Operating profit (£m)

6.6 11.3 (41.6 )%

Operating margin

6.3 % 9.5 % (320 )bp

Average staff numbers

2,409 2,611 (7.7 )% 30 Sep 2016 31 Mar 2016

Closing staff numbers

2,420 2,459 (1.6 )%

More challenging markets, as anticipated

Asia Pacific

• Improved performance in a more stable mainland China trading environment
• Continued pursuit of outbound investment opportunities with selected Chinese contractors
• Immediate outlook remains unchanged, and the region continues to offer attractive,

medium term growth.

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30 Sep 2016 30 Sep 2015 change

Revenue (£m)

57.3 51.6 11.0 %

Operating profit (£m)

4.1 3.4 20.6 %

Operating margin

7.2 % 6.6 % 60 bp

Average staff numbers

1,307 1,499 (12.8 )% 30 Sep 2016 31 Mar 2016

Closing staff numbers

1,288 1,354 (4.9 )%

Partnering approach for growth

Energy

• Organic constant currency revenue decline of 5%
• Oil and gas (O&G) markets remain difficult, particularly in North America where we are more

exposed to capital expenditure budgets - acquisition goodwill impairment taken in the period

• PP&T integration has progressed well and we were delighted to secure our first major US contract

win with DUF6

• Government support for Hinkley Point C is a positive signal for UK energy infrastructure spend
• Overall, the outlook remains positive, despite continued hiatus on PP&T product sales into Japan.

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30 Sep 2016 30 Sep 2015 change

Revenue (£m)

154.9 97.8 58.4 %

Operating profit (£m)

8.4 7.1 18.3 %

Operating margin

5.4 % 7.3 % (190 )bp

Average staff numbers

2,352 1,830 28.5 % 30 Sep 2016 31 Mar 2016

Closing staff numbers

2,373 1,806 31.4 %

PP&T successfully integrated, in a difficult first half

Cash flow

• Working capital outflow reflects North American growth, extended payment profile in the Middle

East and cash flow timing issues on a couple of projects in PP&T

• Provisions/other includes share based payment charge
• Closing net borrowings of £90.3m (March 2016 net funds: £191.7m).

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(£m) 30 Sep 2016 30 Sep 2015

Underlying operating profit

65.3 59.0

Depreciation/amortisation

11.2 11.9

Working capital

(65.1 ) (38.9 )

Net capital expenditure

(7.0 ) (11.1 )

Provisions/other

6.9 6.3

Underlying operating cash flow

11.3 27.2

Working capital performance

Pension

• £334m IAS 19 deficit net of deferred

tax at 30 Sept 2016 (March 2016: £216m)

• Discount rate down 110 basis points

to 2.4%

• Deficit repayment of £33.6m in

2016/17, escalating at 2.5% per annum under 2013 triennial

• March 2016 triennial valuation

negotiations ongoing.

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Reduced discount rate reverses downward trend in the deficit

263 258 235 238 215 216 334

Sep 2013* Mar 2014 Sep 2014 Mar 2015 Sep 2015 Mar 2016 Sep 2016

IAS19 deficit net of deferred tax (£m)

* Restated for IAS19 revision

Summary

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• Good overall results, with underlying profit before tax up 14%
• Market conditions remain mixed across the Group, with increased

volatility in some areas

• Strong first half in UK and North America, with Middle East and

Energy more challenging

• Overall, we remain confident and our outlook for the full year is

unchanged.

Uwe Krueger

Chief executive officer

15

Strategic focus

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Three key markets

Development of new business and service lines

• Atkins Acuity
• Digital

Opportunities for increased geographic and sector exposure

• North America
• Middle East and Africa
• SE Asia
• Nuclear

Government commitment and need for infrastructure spend

• UK and Europe
• North America

New growth initiatives

Delivering growth ahead of GDP

17

Core markets Market share

Commitment to 8% operating margin remains.

Core markets

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UK and Europe

• National Infrastructure Delivery Plan
• utlines £483bn of investment (£300bn
• ver 5 years to 2020–21)
• We estimate our addressable spend on

HS2, Heathrow expansion, Crossrail2 and Hinkley Point C to be around £6bn Key funding initiatives HS2 £55.7bn spend (including rolling stock). Current Engineering Delivery Partner role. North America

• $305bn FAST Act (3.5% annual

increase to 2020)

• FAST Act provides $10bn

for rail projects

Project example – Purple Line Project example – HS2

Project team draws on our resources across US, Hong Kong, Middle East, UK and the GDC.

Hinkley Point C

Our support to EDF currently comprises:

• Engineering and project management services from within our

energy business as the project moves through design and prepares for construction

• Delivery of large scale design packages, in particular civils works

through our UK infrastructure team

• Cost management service delivered by F+G, our cost and project/

programme management business.

19

A collaborative effort

Market share

20

Platforms for growth

• Howard Humphreys in East Africa
• Collaborative approach with Acuity

Middle East and Africa

Potential for organic and M&A growth through

• regional expansion
• rail
• focus on markets beyond transportation

North America

Growth through PP&T

• Differentiation through unique

technologies

• US Tier 1 market opportunities

Nuclear

Growth facilitated by partnering

• China outbound – CHEC, CREC,

China First Highway

• Singapore opportunities

SE Asia

Growth through differentiation

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• Atkins is becoming a driver of digital innovation in the

engineering industry

• We are increasingly well positioned in attractive growth

markets across the nuclear life cycle

• Our new Acuity business offers a unique combination of

consultancy and engineering/technical expertise

• India is our centre for technical and digital excellence.

Themes from the Capital Markets Day (30 September 2016)

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New growth initiatives

Atkins Acuity

New growth initiatives

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Digital – Intelligent Mobility Focus on key accounts Expand and adapt core services Digital alliances Re-imagine infrastructure design New digital value propositions.

£200m £20m

Smart motorways IM services & products Smarter motorways Consultancy Mainly UK Global

Summary

• Strategic focus on three key markets
• Attractive growth drivers including urbanisation,

increasing demand for energy and ageing infrastructure in mature markets

• Growth in existing markets through differentiation
• Commitment to 8% operating margin remains.

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Appendices

25

Working capital movement

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30 Sep 2016 31 March 2016 Inc/(Dec)

UK and Europe

58.9 62.9 (4.0 )

North America

102.8 80.0 22.8

Middle East

65.7 66.4 (0.7 )

Energy

76.5 38.8 37.7

Other

16.1 6.8 9.3 320.0 254.9 65.1

Segmental lock-up

• North American increase reflects significant revenue growth in the period
• Extended payment profile in the Middle East increasing lock-up days
• Energy increase primarily due to acquired working capital in PP&T.

Revenue bridge

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M&A and currency effects 904.6 994.7 [VALUE] 57.8 21.8

Sept 2015 Revenue FX impact Acquisitions/ disposals impact Organic growth Sept 2016 Revenue

54.1

Profit bridge

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Underlying profit before tax 55.8 63.6 2.9 3.6 1.3

Sept 2015 Underlying FX impact Acquisitions/ Disposals impact Organic growth Sept 2016 Underlying

Disclaimer

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The information in this presentation pack, which does not purport to be comprehensive, has been provided by Atkins and has not been audited or otherwise independently verified. While this information has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by Atkins as to or in relation to the accuracy or completeness of this presentation pack or any other written

• r oral information made available as part of the presentation and any such liability is

expressly disclaimed. Further, whilst Atkins may subsequently update the information made available in this presentation, we expressly disclaim any obligation to do so. The presentation contains indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group’s results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ materially from those currently

• expected. No obligation is assumed to update any forward-looking statements, whether as a

result of new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast.