Atkins posts strong half year result but raises concern over Middle East prospects

UK and Europe CEO Nick Roberts “calmly confident” about UK market growth as UK business reports half year revenues up to £458.7M from £428.3M this time last year, with margins at 6.1%.

Nick Roberts, Atkins

Consultant Atkins posted strong half year results for the six months ended 30 September 2015 with global revenue up 8.8% to £904.6M and underlying pretax profits up by 19% to £55.8M.

The UK and Europe business also reported “significant improvement" with revenues up 7.1% to £458.7M from £428.3M at the same point last year, and margins climbing to 6.1% - in contrast to the “mixed first half” reported last year.

However the group raised concern over the future prospects in the Middle East stating that “client caution regarding infrastructure and property commitments is increasing and we are closely monitoring government decision-making and cash liquidity."

It added: “We continue to see long-term major project opportunities come to the market in our strategic focus areas, although we expect the awarding of contracts to remain slow throughout the second half of the year.”

Total group staff numbers were 18,609 at the end of September 2015, 0.8% higher than at 31 March 2015 and 4.0% higher than the same time last year. The UK and Europe business also saw staff numbers climb 5% to 9,865.

UK and Europe CEO Nick Roberts said he was “calmly confident” about the prospects across UK markets going forward but was awaiting the outcome of Chancellor George Osborne’s Comprehensive Spending Review this month to confirm how these  prospects will develop.

“We can speculate of course [over the CSR contents] but we have to await the outcome,” he said. 

“But overall the reality is the UK government’s continued commitment to infrastructure and to the Northern Powerhouse and developing infrastructure in London,” he added. “There may [for example] be impacts on long term spending on transport but the reason I am optimistic and confident is that we are well diversified and so well positioned to be able to make the right choices.”

Nick Roberts, UK and Europe chief executive explains Atkins latest half year results and highlights the future prospects for the UK and European business.

Interview by Antony Oliver

Your global revenue, profit and margin is up with “significant improvement in UK and Europe”. How have business challenges changed over the last 12 months.

The challenge has been to select and focus on the opportunities that we really want across the UK and European markets. The refocus that we have placed on specific markets and on specific clients really underlines that story.

UK and Europe revenue is up to £458.7M from £428.3M for the first six months, with margins of 6.1%. This time last year you reported a “mixed first half”. What is changing?

This time last year the rail, environment and water markets were very challenging but we are now seeing the results of our prioritisation and commitment internally and with clients. We are now calmly confident about what we see in the market right now in the UK. Of course we are awaiting the outcome of the Comprehensive Spending Review [to confirm how the market prospects will develop].

Your staff numbers are up to 18,500 with 9,865 in UK. Staffing, skills and resourcing are well documented challenges – has this changed for you over the last 12 months? 

The news around our staffing is really positive and I think our UK churn rate of around 12% is pretty good in a growing UK market. In the first half of this year we have taken on 380 graduates and we are really pleased with the diversity of that group with 30% of our new graduates and 20% of our new apprentices being female. I believe that we are now better able to attract and retain staff.

You state that you have “confidence as we look into the second half”. What impact do you expect the forthcoming Comprehensive Spending Review to have on your UK business? 

We can speculate of course [over the CSR contents] but we have to await the outcome. But overall the reality is the UK government’s continued commitment to infrastructure and to the Northern Powerhouse and developing infrastructure in London. There may [for example] be impacts on long term spending on transport but the reason I am optimistic and confident is that we are well diversified and so well positioned to be able to make the right choices. 

You say “the creation of the National Infrastructure Commission will help build consensus behind the funding and delivery of the UK’s critical national infrastructure.” Will it really make a difference to your business by accelerating projects? 

The National Infrastructure Commission is a very positive step. We take confidence from focus [on infrastructure investment] and what the National Infrastructure Commission will do is find that focus around prioritisation. It should also be able to remove some of the political and other barriers that stop projects happening.

Are you concerned about the ability of your public sector clients to have sufficient resources to properly administer contracts in the near to medium future?

Challenges around public sector capability to deliver are not new. It is an opportunity for us to work more closely with our clients to help get their projects to market. Overall we can help our clients.

To what extent can a greater client focus on outcomes help your business to get paid for the value that you add?

Clients are always very interested in a conversation about long term value. Procurement teams, of course, try to get best value [from contracts] but by being close to the senior teams you can have a bigger conversation about creating longer term value. It is increasingly easy to have a conversation about asset management – but the actual conversation itself isn’t an easy one. The TOTEX conversation is now becoming more “normal” – it is not an easy conversation but we are having it, particularly in the water industry. It is about enlightened leadership as the challenge of turning a long tem Totex discussion into reality can be difficult.

As the size and complexity of projects is increasing – are you fit for the future?  

Size and complexity is great news for us – and it is not new. Our recent restructure across the UK and US businesses was to give us more flexibility to meet the challenges globally and through our global design centres in India we are accelerating this activity.

Is there still too much optimism and willingness to chase exciting projects without properly considering the long term risks? 

There is always a desire on the ground to chase exciting projects and we don’t want to stop that as small projects can often lead to bigger relationships with new clients. But we do have very strong governance processes around our bidding to properly manage the risks.

Atkins half year results can be viewed here

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