Full-year results from the Human Screen

When the Human Screen flicks through the many prestigious projects companies like Atkins work on, The Hoover Dam say, he wonders whether they built the dam, or advised on the design of a small spigot!

Highlights

• Adjusted operating profit down 7%
• Return on tangible assets: 13.5%
• Adjusted net profit of ''79.1m compared to net cash flow of ''59 (''45m after net capital expenditure)
• Net cash down 18% at ''60m, (Net debt of ''532m after pension deficit of ''205m and approximate capitalised operating lease commitments of ''387m)
• Per-share dividend up 5%

The Human Screen comments:

W S Atkins’ architects, engineers, planners, project managers and consultants design and manage construction, engineering and infrastructure projects. The Human Screen recognises that’s a mouthful but frankly he finds it hard to visualise the full range of Atkins’ activities, activities that vary around the world. Fortunately Atkins publishes an encyclopaedia of sectors and services, itself a marvel of design.

Flicking through the many prestigious projects companies like Atkins work on, The Hoover Dam say, it’s sometimes hard to tell whether they built the Dam, or advised on the design of a small spigot (they provided inspection and quality assurance services to contractors building the by-pass).

Atkin’s main market is the UK, the source of about half of revenues and operating profits, where it’s a partner in a joint venture operating and maintaining the M25. It’s also the official engineering design service provider for the London Olympics. But, like other consultancies, it’s looking to foreign, and especially emerging markets for growth and diversification.

The Human Screen is neither hopeful, nor depressed by this prospect. It’s inevitable, because construction is a global industry, but everybody is doing it as the forces underpinning globalisation and the strength of China in particular is in question.

Cash flows are lagging earnings but Atkins is potentially a stalwart. Although it cut its dividend in 2003 after the failed implementation of new finance and HR systems caused a calamitous but temporary fall in profit, it has an otherwise unbroken record of dividend hikes since Sharescope time began in 1992. The dividend yield is 4.27% and on an unlevered post-tax earnings yield of 10.5%, it doesn’t look too expensive.

More on Atkins

LON:ATK

HS++ (currently being considered for inclusion in the Thrifty 30)

*The Human Screen appreciates the Hoover Dam was built in the 1930′s