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Reviews 23
Our Highways and Transportation segment
had a good year. Operating profit increased
by £3.6m (27%) as margins grew to 6.1%
(2007: 5.3%) due to the strong demand for
our higher margin design activities. Staff
numbers reduced by 9% primarily through
the transfer of those previously engaged
on the Highways Agency Area 10 and
Northamptonshire County Council contracts,
which both ended during the year, to new
service providers.
Our highway services business, which
represents around two-thirds of this
segment’s revenue, is engaged in operating,
maintaining and improving highways and
motorways on behalf of the Highways
Agency and local authorities. The business
performed well, benefiting from the first
full-year’s revenue from the Cambridgeshire
County Council contract won last year.
This year also included the final year of the
Northamptonshire contract which ended
on 28 March 2008. During the year we
were awarded the Area 6 MAC contract by
the Highways Agency. This five-year contract,
with an option to extend to a total of
seven years, commenced on 1 June 2008.
We are currently bidding for a number of
further commissions including MAC contracts
for the Highways Agency Areas 4 and 9.
Our transport design business, which delivers
all aspects of design of highway infrastructure
and transport technology, performed well.
During the year we completed the design
of the widening of junctions 6A to 10 of
the M1 and were awarded a number of
projects for the Highways Agency including
the detailed design for widening two lengths
of the M27 and extensions to a number of
other commissions. This year we also
succeeded in securing major design
commissions for the A14 in Cambridgeshire
and the M74 in Scotland. Our intelligent
transport systems group continues to grow
as the market for technological solutions
including ramp metering and traffic
management information develops. In
February 2008 we commenced a three-year
contract to provide driver information,
network management and operational
services to Transport Scotland in their
interim traffic control centre and we continue
to work extensively with Traffic Wales.
Our transport planning business, which
provides a full range of strategic, policy,
management, forecasting, business case
and investment appraisals for infrastructure
investment consultancy services, was
augmented during the year by the
acquisition and successful integration of the
Intelligent Space Partnership. The business
had a good year and our workload in road
pricing through the Transport Innovation
Fund, technical advice and research for
central Government on strategic planning
and policy, rail planning, and the delivery
of local transport plans remained strong
throughout the year. We provide high-level
transport governance advice for the major
metropolitan areas of the UK, and, on
behalf of the Department for Transport,
we developed the guidelines and assessment
methodology for highway flood relief
funding following the summer floods
in 2007.
In May 2008 the Connect Plus consortium,
in which we are a member, was announced
as the Highways Agency’s provisional
preferred bidder for the 30-year M25
motorway widening Design Build Finance
and Operate (DBFO) contract.
Final confirmation of the contract would
give Atkins responsibility for designing the
works to increase the capacity of the M25.
This design work should commence before
financial close, which is expected to be late
2008 or early 2009, to enable the contract
to start on site as soon as possible. As well
as being a 10% shareholder in the Connect
Plus joint venture company, our involvement
will include a 32.5% share in the operation
and maintenance joint venture responsible
for the management of the entire M25
and a network of feeder roads including the
tolling operations at the Dartford Crossing.
Outlook
The recent UK Government Comprehensive
Spending Review indicated that transport
expenditure would increase by 2.5% per
annum up to 2019 with much of that
increase in the early years. On that basis
we would expect modest growth in the
overall market but in the areas in which
we operate, growth should be higher as
the Government looks to deliver capacity
and efficiency savings. We expect projects
of national importance, such as the M25,
M74, A1 and A14 to continue but other
projects may slip, particularly where
innovative technology solutions in which
we have a deep and broad expertise (such
as motorway access management) could
be deployed.
Our recent success gives us confidence
that the outlook for the Highways and
Transportation segment is strong,
underpinned by our order book at
31 March increasing to 78% of budgeted
revenue for 2008/09 (2007: 77%).
Introduction Reviews Governance Financial Statements Investor Information
WS Atkins plc Annual Report 2008