Atkins reports 17% boost to turnover

Atkins’ latest financial results make comfortable reading, with an interim turnover of £790m generating a pre-tax profit of £31m.

But Atkins’ profitability needs to remain firm if the consultancy firm is to bear the weight of its two major long-term headaches: its pension fund and Metronet.

The pension fund has a massive – and still rising – 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 at a total cost of £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 by 1,000 to cope with the extra workload. 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’ 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 years.

It is expected to generate an annual turnover of £30m.

The set-up costs of the contract generated a one-off cost that 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% and staff numbers jumped by 800 to a new tally of 2,400 – with 650 of these being based in China.

Atkins’ 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.

[Contract Journal, 29 November 2006, p10]