WS Atkins plc Preliminary results for the year ended 31 March 2016 - - PowerPoint PPT Presentation

WS Atkins plc

Preliminary results for the year ended 31 March 2016

16 June 2016

Uwe Krueger

Chief executive officer

Delivering the strategy

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
• n 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.

Strong performance, 8% margin target achieved and PP&T nuclear acquisition completed

Heath Drewett

Group finance director

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

UK and Europe

• 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.

31 March 2016 31 March 2015 Revenue (£m)

943.6 903.8 4.4%

Operating profit (£m)

73.8 60.7 21.6%

Operating margin

7.8% 6.7% 110bp

Average staff numbers

9,707 9,405 3.2%

Closing staff numbers

9,591 9,642 (0.5)%

Significantly improved performance

North America

• 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.

31 March 2016 31 March 2015 Revenue (£m)

362.6 341.4 6.2%

Operating profit (£m)

20.4 20.0 2.0%

Operating margin

5.6% 5.9% (30)bp

Average staff numbers

2,754 2,794 (1.4)%

Closing staff numbers

2,747 2,735 0.4%

Transitional year with two major project wins

Middle East

• 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.

31 March 2016 31 March 2015 Revenue (£m)

248.3 216.7 14.6%

Operating profit (£m)

29.5 22.5 31.1%

Operating margin

11.9% 10.4% 150bp

Average staff numbers

2,580 2,421 6.6%

Closing staff numbers

2,459 2,668 (7.8)%

Metro projects drive strong performance

Asia Pacific

• Performance in the year reflects the slowdown in mainland China and delays in the start
• f 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.

31 March 2016 31 March 2015 Revenue (£m)

106.1 109.7 (3.3)%

Operating profit (£m)

8.5 9.8 (13.3)%

Operating margin

8.0% 8.9% (90)bp

Average staff numbers

1,448 1,561 (7.2)%

Closing staff numbers

1,354 1,523 (11.1)%

Positioning for long term growth

Energy

• 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.

31 March 2016 31 March 2015 Revenue (£m)

201.3 182.0 10.6%

Operating profit (£m)

16.7 20.4 (18.1)%

Operating margin

8.3% 11.2% (290)bp

Average staff numbers

1,840 1,633 12.7%

Closing staff numbers

1,806 1,813 (0.4)%

Resilience from a diversified portfolio

Cashflow

• 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).

(£m) 31 March 2016 31 March 2015 Underlying operating profit

148.2 134.1

Depreciation/amortisation

23.8 22.4

Working capital

(23.6) 11.3

Net capital expenditure

(19.8) (25.2)

Provisions/other

9.9 11.5

Underlying operating cash flow

138.5 154.1

Cash conversion

93% 115%

Good control of working capital

Pension

• £216m IAS 19 deficit net of deferred

tax at 31 March 2016 (March 2015: £238m)

• Good asset performance and discount

rate flat at 3.5%

• Deficit repayment of £32.8m in

2015/16, escalating at 2.5% per annum

• Triennial valuation as at March 2016.

Good asset performance helps reduce deficit

217 263 258 235 238 215 216

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

IAS19 deficit net of deferred tax (£m)

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.

Uwe Krueger

Chief executive officer

Strategic progress

Financial delivery

• Three pillar strategy is delivering: operational excellence, portfolio
• ptimisation and sector/regional focus
• Operational excellence focused on margin improvement and cash

generation

• TSR of 132% over five year period.

6.5 6.4 6.7 7.6 8.0

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 2012 2013 2014 2015 2016

Underlying operating margin (%)

68% 73% 95% 115% 93%

0% 50% 100% 150% 2012 2013 2014 2015 2016

Cash flow conversion* (%)

* Underlying operating cash flow/underlying operating profit

30.5 32.0 33.75 36.5 39.5

10.0 20.0 30.0 40.0

2012 2013 2014 2015 2016

Consistent dividend growth

79.0 82.6 85.7 97.1

30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0

2012 2013 2014 2015 2016 107.3

Underlying diluted EPS growth

Creating shareholder value

8.0% 6.7%

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.

Sector focus growth

50 100 150 200 250 FY12 FY13 FY14 FY15 FY16

11.9% to FY16

Energy

Revenue CAGR

5 10 15 20 25 30 35 40 FY12 FY13 FY14 FY15 FY16

10.0% to FY16 Operating profit CAGR

• Focused investment, both organic and inorganic, since 2012
• Significant increase expected in FY17 following PP&T acquisition.

Skills and geographies enhanced

Howard Humphreys Nuclear Safety Associates Confluence Houston Offshore Engineering PP&T Terramar

• Significantly strengthened nuclear and programme management capabilities
• SE Asia, Africa and Norway.

Looking forward

Our strategy

Our strategy is to focus on growth and, selectively, to increase our geographic footprint and capabilities through targeted international expansion organically and by acquisition.

“

Our strategy is to focus on revenue growth and, selectively, to increase our geographic footprint and capabilities through targeted international expansion,

• rganically and by acquisition.

” “

Market context and drivers

Strong, long term growth drivers

• Urbanisation in developing markets
• Increasing demand for energy
• Ageing infrastructure in mature markets
• Demographic changes

But continued short term uncertainty

• Depressed oil price impacting demand, liquidity

and client confidence

• US Presidential election and EU referendum.

Drive for value creation remains

Strong market drivers for revenue growth

+

Differentiated offering

+

Invest to grow

• rganically and by acquisition

Shareholder value

Strategic actions

FOCUS Advisory at the heart of three focus markets DIFFERENTIATION Innovation through clients, collaboration and technology INVESTMENT Organic, partnerships and M&A Ongoing operational excellence remains the embedded foundation. 1 2 3

Focus

1

Three key markets

Focus

• Unique combination of engineering, infrastructure and technical expertise

with consultancy around strategy, structuring and financing

• New strategic alliances and partnerships with a focus on emerging

markets

• Supports strategic asset management, intelligent mobility and digitisation
• f infrastructure
• Explore expansion potential in SE Asia, Africa and North America
• Cross-selling opportunities for the Group.

Advisory business – the opportunity

1 Potential to grow revenue to £200m over a 4-5 year period with an initial year one investment of around £2m.

www.atkinsacuity.com

Current projects

• Traffic planning commission in

Turkey

• Nairobi Light Rail in Kenya
• Enterprise project in Abu Dhabi
• Sustainable energy for all –

Eastern and Southern Africa

• Transport National Planning in

Malawi.

Advisory – experienced team, new business

Focus

Dominic Harvey Former managing partner

• f Norton Rose Fulbright

Johan Hesselsøe

Former McKinsey Principal

Marie Lam-Frendo

Former World Economic Forum Director

Roddy Adams

Former KPMG Partner

Michael Traem

Former AT Kearney EMEA CEO and Arthur D. Little CEO

Cosette Canilao

Former Philippines PPP Managing Director

1

Differentiation

• Focus on client proximity and key account management
• Efficient internal collaboration critical on major projects – Global design

centres at heart of achieving this

• External collaboration through partnerships
• Embracing technology to drive operational efficiency and incremental

revenue opportunities.

Clients, collaboration and technology

2

Vitrification Digital surveying Driverless cars - VENTURER

Differentiation

• Focus on client proximity and key account management
• Efficient internal collaboration critical on major projects – Global design

centres at heart of achieving this

• External collaboration through partnerships
• Embracing technology to drive operational efficiency and incremental

revenue opportunities.

Clients, collaboration and technology

2

Differentiation

Technology – Intelligent Mobility

To enhance capacity and safety through data exploitation Our involvement

• VENTURER - Connected and autonomous vehicles using smart

infrastructure (project manager role)

• Flourish – driverless vehicles for the older generation
• Work for Department of Transportation modelling impact of

connected autonomous vehicles

• Dubai
• Colorado Department of Transportation.

Investment

Developing a talented, engaged workforce

3

• In the UK we are ranked 17th in the Sunday Times 25 Best Big Companies to

Work for 2016, the only engineering and infrastructure company listed

• Diverse Board enhanced by industrial experience of Gretchen Watkins and

financial experience of Catherine Bradley

• Over 400 graduates hired globally in 2015/16
• Engagement with schools and colleges to attract students into science,

technology, engineering and mathematics (STEM)

• Founder member of The 5% Club committing to at least 5% of UK workforce
• n formal apprenticeship or graduate schemes (currently at 12.3% in the UK).

Clearly defined priorities

• North America
• SE Asia
• Energy, nuclear in particular
• Technology
• Advisory.

Investment

Enhancing our geographic footprint and skills

3

• We are a cash generative business and will re-invest for both organic and

inorganic growth

• Strict financial discipline: conservative management of the balance sheet
• Bolt-on acquisitions form a key part of our growth strategy.

• Consistent

dividend growth

• Full year dividend

up 8.2% in FY16.

• HOE
• NSA
• Terramar
• PP&T
• Howard

Humphreys

• Employee

development

• Client

engagement

• Technology
• Advisory

Progressive dividend policy

Investment

Capital allocation

Reinvest for organic growth Acquisitions in line with

• ur strategy

3

Summary

• Market-leading international infrastructure, design, engineering and

project management consultancy

• Attractive growth drivers including urbanisation in developing markets,

increasing demand for energy and ageing infrastructure in mature markets

• Differentiation will support further revenue growth
• Commitment to 8% operating margin remains
• Increasingly diversified portfolio provides resilience and the Group has

delivered consistent financial performance over the cycle

• Strong, well capitalised balance sheet provides resources for future

growth.

Appendices

Profit bridge

106.7 121.9 139.0 131.1 4.4 2.8 6.9 1.5 15.1 2.0 4.7 0.4 6.3 3.2 3.1

• f acquired

• f acquired

Working capital movement

31 March 2016 31 March 2015 Inc/(Dec) UK and Europe

62.9 53.7 9.2

North America

80.0 86.3 (6.3)

Middle East

66.4 53.0 13.4

Asia Pacific

8.8 4.2 4.6

Energy

38.8 36.9 1.9

Other

(2.0) 4.3 (6.3)

Segmental lock-up

Disclaimer

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.