Atkins acquires nuclear waste experts PP&T for $318m

PP&T, hitherto the projects, products and technology segment of US-based, private-equity owned parent EnergySolutions, is a significant player in the global market for nuclear waste remediation engineering services.

The unit has, according to Atkins house broker Numis, 55% of the North American market and 45% of the rest of the world, particularly focused on the decommissioning of high-hazard facilities and remediation of waste storage sites.

Atkins said the acquisition, which should complete in the first quarter of 2016, would accelerate its nuclear strategy and that PP&T added attractive long-term growth and profitability, with a complementary customer base and some unique technologies in vitrification and water clean-up that will add to last year's acquisition of Nuclear Safety Associates (NSA).

The acquisition is expected to deliver operating margins above Atkins' 8% target, and is expected to be double-digit earnings enhancing in the first full year after completion and to exceed group cost of capital in the second year post completion.

A net debt position of £31m is now expected for the March year end, from previous estimates for net cash of £187m.

In the last calendar year, PP&T reported revenue from continuing operations of $281.4m and adjusted operating profit of $30.7m from a 10.9% adjusted operating margin.

Atkins chief executive Uwe Krueger said the acquisition creates a global platform for the group's nuclear business.

"Our combined business is well positioned in all the major nuclear markets in North America, UK, Europe, Middle East and Asia Pacific.

"In the US, which has the largest nuclear fleet, we are at the top table for decommissioning, site operations, major projects and consultancy."

Numis estimated that the combined nuclear business would have revenues in the following financial year of at least £300m and generate roughly 20% of Atkins' EBITA.

"We think nuclear decommissioning is a robust longterm growth market, with the cumulative number of commercial plants decommissioned by 2030 likely more than double the current number. We see significant opportunities to sell into a broader combined customer base, in particular leveraging PP&T's technology portfolio and providing a better platform for growth in for example Japan, China and Germany."

"[The deal] looks a very good fit with the group's strategy, and we think enhances both the margin and growth prospects for the group. Given the low cost of funding we raise our FY17 EPS forecast by 12%. The shares trade on a CY17 P/E and EV/NOPAT of under 11x, which we think is very good value for this quality of business," Numis analyst Will Wallis wrote in a research report sent to clients.

As a result it raised 2017 EPS forecast to 122.8p from 109.9p.

Shares in Atkins were up 6.8% at 1,455p by 0910 on Tuesday.