Middle East contracts to boost Atkins

Engineering consultancy Atkins expects flat annual revenue from its UK and continental European business, but said rail contract wins in the Middle East will help bring its full-year results into line with expectations.

The oil, gas and nuclear businesses were the group's strongest-performing businesses, but across the UK engineering industry, topline growth prospects this year will be muted owing to strong currency headwinds and subdued organic revenue growth.

Atkins said UK revenues would be broadly similar to last year despite the impact of the disposal of its UK highway services business, but operating margin is expected to show an improvement in the second half as a result of this disposal, together with the benefits from its new strategy to improve operational efficiency and cut costs.

Business in both the US and Scandinavia was stable, but the Middle East continued to deliver an improved performance in the second half. The company, which employs some 17,400 people across the globe, is mobilising resources following its recent metro wins in the region and the impact of these major projects, together with the addition of its Confluence team based in Abu Dhabi, will boost headcount growth in the region through the second half.

In Asia Pacific, growth tipped up at the end of the year as the company diversified beyond its historic focus on the Hong Kong rail sector and entered new arenas, including project management consultancy for the West Kowloon cultural district development in Hong Kong. The company also won the concept design for the new Qingdao airport in the Shandong province of China, working alongside China Southwest Architectural Design and Research Institute.

Growing risk appetite

Rising risk appetite among chief financial officers (CFOs) supports the notion that capital expenditure will increase for UK companies in the near term. For example, a survey published by Deloitte last week shows that UK CFOs have a far greater appetite for risk than at any time since the 2008 crisis and plan to increase capital expenditures. The percentage of CFOs who believe now is a good time for taking risk onto the balance sheet increased to 71% in the first quarter from 57% in the last quarter of 2013.

Yesterday Atkins announced a contract from Dong Energy to provide detailed substation designs for the 580MW Race Bank offshore wind farm, off the east coast of England. It was signed after deals with the Danish developer to design the substations for the Walney and Burbo extension projects.

Dong Energy wants to cut the cost of offshore wind by 35% to 40% by 2020 by standardising the building of wind farms. Atkins is providing a design for five substations enabling a production line approach to fabrication, rather than a bespoke build each time.

The shares, which have been volatile this year, rose 1.35% in early trading to 1,424p.