In Line with Expectations
Third quarter trading update - 10 February 2016
WS Atkins plc ("Atkins" or the "Group"), the design, engineering and project management consultancy, today provides its third quarter trading update for the period from 1 October 2015 to date.
Group performance
In the context of headwinds in certain markets, the Group continues to trade in line with expectations. Our outlook for the full year remains unchanged as we make good progress towards our 8% Group operating margin target.
United Kingdom and Europe
We were encouraged by the Government's autumn statement in October which underpinned its commitment to infrastructure spend in the UK. Our transportation business, the largest division in the UK, remains active and during the period we secured the East West Rail Phase 2 scheme as part of our alliance with Volker Rail, Laing O'Rourke and Network Rail. This multi-year contract is expected to deliver up to £100m of revenue for the Group over its life. Overall, while we anticipate little sector revenue growth in the second half, margins are expected to show good progress.
North America
Our North American business is expected to show second half revenue growth year on year as we mobilise resources on the recently won project NEON and, as previously stated, we anticipate some margin improvement in the second half. Looking forward, the agreement reached on a five year Transportation Bill should provide greater pipeline visibility, although we do not expect to see any material impact until after the forthcoming presidential election.
Middle East
In our Middle East region we have continued to engage significant resources working on the Riyadh metro and two lines of the Doha metro programme, as well as managing the Central Planning Office in Qatar, where our role is nearing completion. Looking forward we remain cautious around the outlook for the region, given increased uncertainty as to the timing and funding of our pipeline opportunities, particularly in property and infrastructure.
Asia Pacific
The performance of our Asia Pacific region has been stable in the period, despite the slowdown in mainland China which we are expecting to continue through the next financial year. Our strategy of geographic diversification continues and, in particular, we are making good progress in developing our relationships with Chinese contractors as they seek to grow outside their domestic market.
Energy
The performance of our oil and gas business continues to be mixed. We have seen a further deterioration in trading conditions, particularly in our more capital expenditure exposed North American business, offset to some extent by growth in the Middle East. Following the demobilisation of the Silos Direct-encapsulation Plant project, our nuclear business has secured additional decommissioning work at Sellafield in the period. In addition, we are progressing the regulatory clearance required for our acquisition of the Projects, Products and Technology ("PP&T") segment of EnergySolutions, which we anticipate will complete early in the new financial year.
Balance sheet
The Group's financial position remains strong. We expect to report net funds of around £190m at 31 March 2016, excluding the funding of the PP&T acquisition. We are pleased to announce that during the period our current revolving credit facility has been extended by one year to a new maturity date of January 2021.
Outlook
In the context of headwinds in certain markets, the Group continues to trade in line with expectations and our outlook for the full year remains unchanged.
The Group will publish a pre close trading update on 13 April 2016.
