AtkinsRéalis: The new era of engineering and nuclear power

Canadian engineering services company AtkinsRéalis stands out as a leader in the latest generation of energy infrastructure, with roots dating back to 1911. Born of the merger between Canadian giants SNC and Lavalin, and strengthened by the acquisition of engineering consultancy Atkins, the company has chosen Montreal as its home port and the Toronto Stock Exchange as its listing. This fast-growing company has an ambitious strategic plan. The catalyst? Its nuclear segment, which is expanding rapidly in North America.

Created by the integration of long-standing organizations dating back to 1911, AtkinsRéalis is one of the world's largest engineering and construction consulting groups. Formerly known as SNC-Lavalin, following the merger of the two Canadian companies SNC and Lavalin, the company decided to change its name to Atkins after the acquisition of an engineering consulting firm. The Canadian group is based in Montreal and listed on the Toronto Stock Exchange.

This high valuation is underpinned by momentum since the beginning of 2024, with the company constantly revising its earnings forecasts upwards. What's more, the order backlog is also growing, enabling the company to secure solid revenues over the long term.

Business model 

As you can see, the company's business is very broad and diversified, but there are three main divisions: 

• Engineering services and consultancy (68%): the company's main service sectors are buildings, defence, mining, power generation, transport and water. Each sector offers design, studies, consultancy, financing, asset management, engineering, construction, procurement, operation and maintenance services. The engineering services segment has achieved significant revenue growth of 26% in 2023 and a record order book, thanks to continued expansion in the United States, generational investment in infrastructure in the United Kingdom, the award of major projects in Canada and ambitious infrastructure development in the Middle East.
  Nuclear (12%): this segment is growing by 17% over 2023. AtkinsRéalis supports clients throughout the nuclear life cycle by offering them a full range of services: consulting, EPCM services, field services, technology services, spare parts, reactor support, decommissioning and waste management.
• Operations and maintenance (20%): this segment is an important component of the monitoring throughout the value chain of projects carried out by or in collaboration with AtkinsRéalis.  Although the company completed the closing of major contracts, which is reflected in lower revenues, it also developed Capital, its investment, financing and asset management arm.

Source: Investor Overview

According to their URD, whether it's the $100 billion planned for infrastructure in the United States, the United Kingdom's commitment to achieving carbon neutrality by 2050, or the $15 billion that Canada plans to invest in clean public transport by 2029, AtkinsRéalis is positioned in clean energy (nuclear, water management, electricity and renewable energies) and sustainable infrastructure (buildings, transport). 68% of the company's main customers are public bodies, which means that the company's business and growth are sustainable. 

Strategic plan respected and exceeded

For the moment, the company is on track with its strategic plan, which it reiterates every two years: in Q3 2024, revenues from AtkinsRéalis services reached $2.3 billion, marking an increase of 15%, of which 14% was organic growth. Revenues from engineering services regions totalled $1.8 billion, up 10%, with organic growth of 8%. The nuclear sector generated revenues of $369 million, an increase of 36%, of which 35% was organic growth. EBIT in Atkins-Réalis' services segment rose by 27% to $239 million. The services order book reached a new record of $16.8 billion, up 35%, while the nuclear order book reached $3.2 billion. Operating activities generated net free cash flow of $267 million. The company's debt is also well under control, with a net debt/EBITDA ratio of 1.4, compared with 2.7 the previous year, pointing to the possibility of further investment.

Source : Investor Overview

AtkinsRéalis' 2025-2027 strategic plan is ambitious, with a number of key objectives. Firstly, the company seeks to achieve a compound annual growth rate (CAGR) of over 8% for organic revenues in the engineering services regions, with a segment-adjusted EBITDA to segmented net revenue ratio of between 17% and 18% by 2027. In the nuclear sector, AtkinsRéalis expects to achieve annual revenues of between $1.8 billion and $2.0 billion, with a segment-adjusted EBIT to segmented revenue ratio of between 12% and 14% by the same year. In terms of financial management, the company is committed to maintaining a ratio of limited net debt and recourse to adjusted EBITDA of between 1 and 2x, and a ratio of FCF to adjusted net income of around 80% to 90%. 

Valuation

We are particularly interested in this group because of its strong growth since 2023. This year alone, the company has posted sales growth of 11.4% to reach 6.8 billion USD over the last twelve months (LTD). Above all, and as I mentioned in Aecom, Fluor, or Quanta), the company has a lower ratio for a slightly higher return on equity of 9.8%.

An expert in nuclear power

A major part of the Group's momentum is based on its nuclear segment. Market prospects are bright, with rising energy demand and low environmental costs. As a result, AtkinsRéalis has genuine expertise across the entire value chain, from site construction and maintenance to waste treatment. Canada is also the world's second-largest producer of uranium, which eliminates the cost of enrichment from this segment, where demand is on the rise and the order backlog has reached a record USD 3.2 billion. Over the full year 2024, this segment will record organic growth of 35%. To find out more about the outlook for nuclear power, please refer to this article and our thematic list.

AtkinsRéalis relies heavily on its CANDU technology, which will not only contribute to increasing Canada's energy independence, but will also help other countries to do the same. The Group's solutions currently supply 15% of Canada with electricity.

CANDU reactors are unique in their ability to co-produce medical isotopes for diagnostic imaging, cancer treatment and sterilization of medical supplies. Canada also produces more than 50% of the world's supply of cobalt-60 from CANDU reactors, which has become the backbone of the Canadian nuclear medicine industry.

As a guarantor of expertise, AtkinsRéalis is involved in the ITER (International Thermonuclear Experimental Reactor) project, which is collaborating with companies from 35 countries to build the world's largest experimental nuclear fusion reactor in the south of France. The project's ultimate aim is to commercialize nuclear fusion. AtkinsRéalis has even been commissioned by the UKAEA (UK Atomic Energy Authority) to draw up a roadmap for the future regulation of fusion energy in the UK. This study details the initial steps required to develop a regulatory and compliance framework for the fusion industry, providing guidance to fusion companies on the path to becoming a compliance body.

Risks For its engineering service, 68% of customers are public entities. Consequently, an economic contraction or downturn in demand could force the state to limit its expansionary policy, potentially leading to a reduction in contracts awarded. AtkinsRéalis may require substantial working capital to finance the purchase of materials and the execution of engineering, construction and other projects before receiving payment from its customers. In some cases, the company is contractually obliged to finance the FDR of projects itself. An increase in WCR could have a negative impact on the company's business, financial position and cash flows.