WS Atkins ousts chief executive after profits tumble

WS Atkins, the troubled engineering consultancy and PFI contractor, yesterday ousted its chief executive, cut a further 400 jobs and warned profits this year would more than halve.

The shock announcement prompted a 72 per cent fall in the company's share price and hit shares in other support services companies such as Serco, Capita and Jarvis. One sector analyst described it as the worst profit warning he had ever seen.

The company, one of Britain's biggest PFI contractors, said that Robin Southwell, who joined as chief executive from BAE Systems 18 months ago, had stood down with immediate effect. He was on a one-year contract and is expected to receive a pay-off worth about £360,000. Atkins' chairman, Michael Jeffries, has taken over temporarily as chief executive while a successor is found.

The company said it would report a loss of £5m for the half-year just ended and blamed problems with the introduction of a new IT system and a sudden and sharp fall in private-sector work in the UK and US.

Full-year profits are now expected to be in the region of £15m, compared with analysts' forecasts of £40m to £42m and a £34.3m profit for last year. Atkins described its performance as "very disappointing".

The company also disclosed that net debts had more than doubled from £57m at the end of March to about £120m at the end of September.

Atkins updated the market as recently as July about the difficulties it was experiencing introducing the new IT systems, which have caused particular problems with billing and credit control. It said that working capital requirements would be £20m to £30m higher but gave no hint of the huge impact on profits.

Ric Piper, the group finance director, said yesterday that cost savings from the introduction of the new systems were not being realised as quickly as expected. In addition, there had been a dramatic fall in business in the US and UK, especially in areas such as quantity surveying.

The bulk of the 400 job losses will be in the UK and will be concentrated mainly on its Epsom headquarters in Surrey. The job cuts will be compulsory.

Atkins will take a £7.5m one-off charge to pay for the redundancies but expects the cost reductions to result in savings of £5m in the second half and £15m in a full year.

The group, part of the Metronet consortium that has been selected to take over two-thirds of the London Underground network, said its public-sector work, which accounts for about two-thirds of total turnover, was unaffected and workload remained strong.

The shares, which have underperformed the support services sector by 50 per cent this year, fell 137p to end at 52p.