Business Review
Segmental performance

Rail

The Rail segment performed well this year and delivered an operating profit of £17.0m, an anticipated and substantial improvement on the prior year driven by the impact of the change in the contractual arrangements on our work for London Underground and increased activity in our higher margin design business. As expected, there was a further reduction in revenue and a small decrease in staff numbers in line with the predicted reduction in activity in relation to Metronet.

Large re-signalling contracts for Network Rail continue to account for nearly half of our revenue. Our commitment to delivery earned us public recognition by Network Rail for our part in enabling them to complete the Rugby and Nuneaton section of the high-profile West Coast Main Line upgrade on time. Re-signalling is an important component of Network Rail’s enhancement and renewals commitment and we anticipate continued spending over the next few years.

During the year we were awarded a significant contract for the re-signalling upgrade in Newport which includes designing, installing, testing and commissioning signalling units on the 35-mile stretch of track between Bristol and Cardiff. On the North London Line, which forms part of the London 2012 transport plan, we have also been appointed to take this re-signalling project from detailed design to commissioning. These two projects have combined revenue of approximately £100m.

The other part of our business, which focuses on rail-related design and consultancy services, has also performed well. Further work secured on the London 2012 transport plan includes the design, installation and commissioning of communications assets at Farringdon, City Thameslink and Blackfriars stations. We have also been awarded new railway enhancement projects for clients including Chiltern Railways, Milton Keynes Partnership and Dubai Ports’ London Gateway. The rail consultancy market, where our clients include the rolling stock owners, train operating companies and financial institutions, has been partly impacted by the current economic malaise; nevertheless notable successes include supporting Hitachi in their successful bid for the Intercity Express Programme.

Crossrail remains a significant opportunity following our appointment to the design framework earlier in the year and to date we have, in partnership with Arup, been awarded the Tottenham Court Road station and bored tunnel design packages.

Outlook

The outlook for 2009/10 for our Rail segment remains positive with 61% of budgeted 2009/10 revenue secured by 31 March 2009 (2008: 65%). The UK rail market continues to demonstrate strong investment, with increasing demand for innovative solutions to meet the need for a capacity-enhanced, reliable railway.

Over the longer term increased spending on enhancements, and continued spending on major signalling works, is expected following the acceptance by Network Rail in February 2009 of the Office of Rail Regulation’s rail spending budget for 2009 to 2014. The level of investment in the London area rail network by Transport for London also provides opportunity. We are well placed to support our clients with the breadth and depth of our multidisciplinary expertise.