Atkins lifts margin to 6.8% at half-year

Atkins has made an interim pre-tax profit of £50m which represents a margin of 6.8%.

The performance represents a step forward from the profit margin of 6.4% achieved in the same period last year.

The consultancy group’s latest financial figures cover the six months to 30 September 2008.

Turnover of £740m was well ahead of the £670m figure in the comparable six months of 2007.

Keith Clarke, chief executive, said growth in revenue was particularly strong in the Middle East business, up 55% compared with the same period last year.

“There was also solid growth in Design and Engineering Solutions and Management and Project Services.

“The increase in the group's operating margin was, as anticipated, largely driven by improvements in our Rail business and the recovery of our Management Consultants business.”

Atkins strengthened its cash position with net funds of £160m at the end of the period.

The cash inflow from operations of £38m was higher than the same period last year when it was impacted by the transition of supply chain arrangements for Metronet.

“As planned, our staff numbers increased by over 1,000 in the first six months of the year,” said Clarke. “At just over 18,300 people, this is 1,400 more than the same time last year.”

Staff numbers have grown strongly in the Middle East - up by almost 40% over last year.

Segmental analysis shows the group’s turnover was made up of six main contributions:

• £210m – design and engineering solutions
• £150m – Middle East, China and Europe
• £140m – highways and transportation
• £120m – management and project services
• £110m – rail
• £30m – asset management

Their contributions by way of operating profits were:

• £17m – design and engineering solutions
• £10m – Middle East, China and Europe
• £8m – highways and transportation
• £8m – management and project services
• £7m – rail
• loss of £1m – asset management

Atkins took further steps in its attempts to resolve the hole in its pension fund.

The defined benefit section of the Atkins Pension Plan was closed to future accrual of benefit, with members being transferred to a defined contribution section of the same plan.

The move means that the defined benefit sections of all Atkins’ pension schemes are closed to new entrants.

Using the accountancy standard IAS19 to evaluate the healthiness of the overall pension situation at Atkins, the result is the shortfall rose by £50m and now stands at £210m.

While obligations have been trimmed back from £1,013m to £968m this was more than countered for by a larger fall in the fair value of the plan’s assets, down from £855m to £759m.

The good news for pensions, both present and future is that the assumptions include:

• 3.6% price inflation (previously assumed figure 3.3%)
• 5.1% rate of increase in salaries (previously assumed figure 4.8%)

Longevity at age 65 for current pensioners has moved in the right direction:

• Men - 22 years (previous figure 19 years)
• Women - women 25 years (previous figure 22 years)

Longevity at age 65 for future pensioners (current age 45):

• Men – 24 years (previous figure 21 years)
• Women - 27 years (previous figure 24 years)