Interim pre-tax profit of £31m for WS Atkins

WS Atkins’s front-line financial figures make comforting reading, an interim pre-tax profit of £790m generating a pre-tax profit of £31m.

But today’s Stock Exchange statement show that Atkins’s current profits need to remain firm if the consultancy firm is to bear the weight of two major long-term headaches – its pension fund and Metronet.

Atkins has a massive pension fund deficit, while there has been a woeful performance by Metronet, the consortium that won two of the three chunky London Underground PPP contracts to give the Tube network an overdue upgrade costing £15bn.

Atkins is a member of the Metronet consortium.

Turnover (six months to 30 September) was 17% higher than in the comparable period last year. Staffing numbers rose 1,000 to cope with the extra workload. Atkins’s expansion has been greatest in its Middle East operations.

The pre-tax profit of £31m was £3m better than in the first half of the previous year.

The group’s divisional analysis shows a sprightly 7.3% operating margin from the design & engineering solutions division. Turnover bounced up to £160m, a rise of more than £30m, and staff numbers were 500 higher at 4,300.

Recruitment and retention of staff is seen as a key priority.

Atkins’s highways & transportation division had to live with a cut in operating margin to 3.3% even though workload rose. The figures were impacted by the mobilisation of the Gloucestershire County Council contract which runs for at least five years - and possibly 15. It is expected to generate an annual turnover figure of £30m.

The set-up costs of the contract generated a one-off cost which squeezed the division’s operating margin.

In rail, the operating margin of 1.3% was identical to that in the same period last year. It would have been higher but for losses on two EU-funded feasibility study projects for the Polish state railway.

The Middle East and China division enjoyed a surge in operating margin to 6.0% and staff numbers jumped by 800 to a new tally of 2,400 – with 650 of these being based in China.

The Atkins group’s pension schemes, when assessed to accountancy standard IAS 19, show assets worth £740m but with defined benefit obligations running to more than £1bn. After taxation considerations, the deficit is now higher at £220m.

The policy of accelerated contributions continues. In the latest six months, £12.5m was poured in (comparable period last year: £5m)

The group is talking to the trustees of the pension plan to agree ways to limit further increases in the huge pension headache.