New contracts give boost to civil engineering group

Atkins put the outperformance down to strong cost controls and an order book boosted by recent contract wins. Shares closed the day up 3.46 per cent at 672p.

The group, which has offices in Leeds, York and Sheffield employing around 600 staff, said profits for the year to March 31 will be "slightly ahead" of the consensus of 86m. However, this is still down on last year's 102.7m.

"The group's solid order book and end-market resilience provide us with confidence that the group is well placed to address the challenges in the year ahead," said Atkins.

The firm – which is working on major projects such as the 2012 Olympic Park and the widening of the M25 London ring road – has recently landed a 350m 10-year road maintenance deal with Oxfordshire County Council.

It has also been appointed architect engineer on a contract to build an experimental nuclear fusion reactor in France, as part of a consortium contract worth 150m euros. Atkins described it as "one of the most technically challenging projects the world has ever seen". The aim is to deliver nuclear fusion on a commercial scale offering safe, limitless and environmentally responsible energy.

Late last year, work was completed on a new storage building for the British Library in Boston Spa, West Yorkshire. Atkins designed the 26m building, which has storage space for an extra seven million items, which works out at an additional 262km of extra shelf space.

The group is also providing architectural and engineering design services on London's Crossrail.

"We continue to trade confidently in what remain turbulent economic conditions. Our work in hand is good, and we have recorded a number of recent wins," said Atkins.

Along with other consultancies, Atkins was forced to shed thousands of staff during the recession due to tough market conditions. Its UK and Middle East commercial and residential property-facing businesses bore the brunt of the cuts.

But the company said its tight controls on costs helped it to a "particularly strong" cash performance during the second half of its financial year, with cash balances of around 300m expected at the year end.

In 2008, the group bought South Yorkshire engineering company MG Bennett for 2.5m. Formed in 1984 and based in Rotherham,

Bennett specialises in mechanical and structural engineering and has a strong track record of work within the nuclear industry.

"Although market conditions remain turbulent in the period, we remain encouraged by the resilience of key earnings streams, headcount management and cost focus," said KBC Peel Hunt analyst Andrew Nussey, who expects to raise his 2010 and 2011 forecasts by about five per cent.

Panmure Gordon analyst Andy Brown said: "Atkins and its consulting peers are still out of favour due to concerns about its Middle East exposure and general UK public sector demand trends."

Analyst Nick Spoilar at Altium Securities raised his target price from 600p to 700p .

"We continue to rate the management of Atkins highly, but are held back in our valuation by the overwhelmingly UK nature of the geographical exposure (79 per cent)," he said. "The sizeable pension deficit also weighs on the rating."