View - Atkins

34 Reviews
Operating and Financial Review
Financial performance
Net finance income
Net finance income for the year was £4.3m
(2007: £3.6m) with the increase partly
attributable to a £1.3m decrease in the net
finance cost on retirement benefit liabilities.
Taxation
The Group’s income tax expense for
the year, on continuing operations, was
£23.3m (2007: £15.2m). As expected,
the normalised effective tax rate increased
to 25.7% from 22.0% in the prior year
which benefited from three years’ research
and development tax credits. The Group’s
effective tax rate is expected to remain below
the UK statutory rate due to the continuing
benefit of research and development tax
credits and the increasing proportion of
profits earned in jurisdictions with lower
tax rates than the UK.
Earnings per share (EPS)
EPS was 98.9p (2007: loss per share 56.8p).
Normalised diluted EPS, which is considered
to be a more representative measure of
underlying trading and relates to continuing
operations, was 66.7p (2007: 56.5p), an
increase of 18%. Further details are given
in note 12 to the Financial Statements.
Pensions
Funding
The latest actuarial valuation of the defined
benefit Atkins Pension Plan (the Plan) carried
out as at 1 April 2007 indicated that the
Plan had an actuarial deficit of approximately
£215m. Accelerated contributions of
£37.5m were made during the year with
a further £12.5m on 1 April 2008. A
commitment to contribute a further £32m
per year for the next six years has been
agreed with the Trustees.
Charges
The Group accounts for pension costs
under IAS 19, Employee benefits. As
expected, following the transfer of 1,622
members from the defined benefit section
to the defined contribution section on
1 October 2007, the total charge to the
income statement in respect of defined
benefit schemes reduced to £17.8m
(2007: £24.9m), comprising total service
cost of £16.7m (2007: £22.5m) and net
finance cost of £1.1m (2007: £2.4m).
The charge relating to defined contribution
schemes increased to £23.3m
(2007: £16.0m).
IAS 19 valuation and
accounting treatment
The Group assesses pension scheme funding
with reference to actuarial valuations but
for reporting purposes uses IAS 19. Under
IAS 19, the Group recognised a post-tax
retirement benefit liability of £153.9m at
31 March 2008 (2007: £175.1m). The
actuarial gain recognised through equity
amounted to £6.4m (2007: £31.3m).
However, after taking into account the
impact of the change in UK tax rates, there
was a post-tax actuarial loss of £1.0m
(2007: gain of £21.7m).
The assumptions used in the IAS 19
valuation are detailed in note 29 to the
Financial Statements.
Cash
Net funds at 31 March 2008 were £168.4m
(2007: £199.1m) made up as follows:
2008 2007
£m £m
Cash and cash equivalents 154.5 187.7
Loan notes receivable 5.6 –
Financial assets at fair value
through profit or loss 29.7 49.6
Borrowings due within
one year (4.2) (0.4)
Borrowings due after
one year (3.2) (23.1)
Finance leases (14.0) (14.7)
Net funds 168.4 199.1
Cash generated from continuing
operations was £80.9m (2007: £93.9m).
Working capital increased by £4.6m during
the year (2007: £7.4m decrease), despite
the 11% growth in revenue due in part to
the continued growth in the Middle East,
which features advance cash receipts on
major projects. The reduction in cash
generated from operations compared to
last year was largely due to increases in
funding the defined benefit pension
scheme deficit.
Net tax paid amounted to £14.7m
(2007: net refund of £4.9m). Payments for
consortium relief were made to Metronet
during the year, reversing a cash timing
difference that had benefited the Group
in 2007. The 2007 figure also included
back-dated settlement of research and
development tax credits.
WS Atkins plc Annual Report 2008