WS Atkins has become the latest firm to dent City confidence in the support services sector, after revealing its pre-tax profit has plummeted by a third.
The group's pre-tax profit fell to £20.9m for the year to 31 March, compared with £31.2m for the same period last year. In contrast, turnover jumped 20% from £673.4m to £806.3m, resulting in a fall in the group's overall operating margin from 4.8% to 3.4%.

Atkins finance director Ric Piper blamed rising PFI bid costs, unprofitable contracts and restructuring costs for the fall. However, he claimed underlying performance was still strong.

Piper said it was a challenging time for the market. Public sector spending plans still had to be converted into contracts, while plunging share markets had hit private sector confidence.

Support services firms have all experienced a fall in their share prices because of City concerns over accounting policies and high PFI bid costs (see graphs, below).

You can’t just fire off a bid for every PFI that comes out

Ric Piper, finance director, Atkins

But there was some good news for the sector last week. Capita, which has a large property consultancy business, reported increased profit and turnover and London mayor Ken Livingstone dropped his High Court case against the part-privatisation of the Tube, which means the scheme can now go full steam ahead.

Atkins spent £8.9m bidding for PFI jobs during the year to 31 March compared with £6.1m for the same period the year before. The biggest bill was £3.8m for the Tube contracts. Atkins is part of the Metronet consortium that is preferred bidder to run and maintain the Bakerloo, Central and Victoria lines and also the sub-surface lines (Circle, District, East London, and Hammersmith and City). Atkins also spent about £2m on the Colchester PFI garrison scheme, which will not be signed until 2004.

Piper said the high initial costs had forced the firm to take a more selective approach to bidding for PFI contracts. He added: "You can't just fire off a bid for everything that comes out."