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% Good overall performance, particularly in UK and North America 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 of 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

Heath Drewett Group finance director 4

Financial summary 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 5

Segmental summary Operating profit/ Operating Revenue £m (loss) 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 6

UK and Europe Strong profit and margin growth 30 Sep 2016 30 Sep 2015 change 451.2 458.7 (1.6 )% Revenue (£m) 39.4 29.8 32.2 % Operating profit (£m) 8.7 % 6.5 % 220 bp Operating margin 9,360 9,724 (3.7 )% Average staff numbers 30 Sep 2016 31 Mar 2016 9,274 9,591 (3.3 )% Closing staff numbers • 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. 7

North America Good first half, supported by major project delivery 30 Sep 2016 30 Sep 2015 change 221.9 177.7 24.9 % Revenue (£m) 15.3 8.5 80.0 % Operating profit (£m) 6.9 % 4.8 % 210 bp Operating margin 2,780 2,759 0.8 % Average staff numbers 30 Sep 2016 31 Mar 2016 2,849 2,747 3.7 % Closing staff numbers • 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. 8

Middle East More challenging markets, as anticipated 30 Sep 2016 30 Sep 2015 change 104.9 118.8 (11.7 )% Revenue (£m) 6.6 11.3 (41.6 )% Operating profit (£m) 6.3 % 9.5 % (320 )bp Operating margin 2,409 2,611 (7.7 )% Average staff numbers 30 Sep 2016 31 Mar 2016 2,420 2,459 (1.6 )% Closing staff numbers • 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. 9

Asia Pacific Partnering approach for growth 30 Sep 2016 30 Sep 2015 change 57.3 51.6 11.0 % Revenue (£m) 4.1 3.4 20.6 % Operating profit (£m) 7.2 % 6.6 % 60 bp Operating margin 1,307 1,499 (12.8 )% Average staff numbers 30 Sep 2016 31 Mar 2016 1,288 1,354 (4.9 )% Closing staff numbers • 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. 10

Energy PP&T successfully integrated, in a difficult first half 30 Sep 2016 30 Sep 2015 change 154.9 97.8 58.4 % Revenue (£m) 8.4 7.1 18.3 % Operating profit (£m) 5.4 % 7.3 % (190 )bp Operating margin 2,352 1,830 28.5 % Average staff numbers 30 Sep 2016 31 Mar 2016 2,373 1,806 31.4 % Closing staff numbers • 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. 11

Cash flow Working capital performance (£m) 30 Sep 2016 30 Sep 2015 65.3 59.0 Underlying operating profit 11.2 11.9 Depreciation/amortisation (65.1 ) (38.9 ) Working capital (11.1 ) (7.0 ) Net capital expenditure 6.9 6.3 Provisions/other 11.3 27.2 Underlying operating 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). 12

Pension Reduced discount rate reverses downward trend in the deficit IAS19 deficit net of deferred tax (£m) • £334m IAS 19 deficit net of deferred 334 tax at 30 Sept 2016 (March 2016: £216m) 263 258 • Discount rate down 110 basis points 238 235 to 2.4% 216 215 • Deficit repayment of £33.6m in 2016/17, escalating at 2.5% per annum under 2013 triennial • March 2016 triennial valuation negotiations ongoing. Sep 2013* Mar 2014 Sep 2014 Mar 2015 Sep 2015 Mar 2016 Sep 2016 * Restated for IAS19 revision 13

Summary • 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. 14

Uwe Krueger Chief executive officer 15

Strategic focus Three key markets 16

Delivering growth ahead of GDP New growth initiatives Core markets Market share Development of new Government commitment Opportunities for increased business and service lines and need for infrastructure geographic and sector spend exposure • Atkins Acuity • UK and Europe • North America • Digital • North America • Middle East and Africa • SE Asia • Nuclear Commitment to 8% operating margin remains. 17

Core markets Key funding initiatives North America UK and Europe • $305bn FAST Act (3.5% annual • National Infrastructure Delivery Plan increase to 2020) outlines £483bn of investment (£300bn over 5 years to 2020–21) • FAST Act provides $10bn for rail projects • We estimate our addressable spend on HS2, Heathrow expansion, Crossrail2 and Hinkley Point C to be around £6bn Project example – HS2 Project example – Purple Line Project team draws on our resources HS2 £55.7bn spend (including rolling stock). across US, Hong Kong, Middle East, Current Engineering Delivery Partner role. 18 UK and the GDC.

Hinkley Point C A collaborative effort 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

Market share Middle East and Africa SE Asia Platforms for growth Growth facilitated by partnering • Howard Humphreys in East Africa • China outbound – CHEC, CREC, • Collaborative approach with Acuity China First Highway • Singapore opportunities North America Nuclear Potential for organic and M&A Growth through PP&T growth through • Differentiation through unique • regional expansion technologies • rail • US Tier 1 market opportunities • focus on markets beyond transportation 20