Despite some “temporary curtailment” in UK contracts as a result of the Brexit triggering and this week’s UK election, project management and technical consultancy WYG PLC (LON:WYG) looks set for a solid performance in the current year – albeit under a new management team.
The AIM-listed firm unveiled the appointment of a new chief executive officer and a new chairman when it reported full-year results today which showed solid underlying growth despite the firm’s profits warning issued in late March.
Back then, WYG’s company’s shares were hammered after it said growth in its UK operations in the fourth quarter was not as strong as the company had expected, with profitability hit as a result of the group’s investment in building its domestic capacity.
Today, WYG reported a 17% rise in adjusted pretax profit to £8.2mln for the year ended March 31, up from £7.2mln a year earlier, although headline pretax profits dipped to £1.6mln from £2.2mln.
The rise in adjusted profits came as the group’s revenue rose by 14% to £151.8mln, slightly better than forecast in March, up from £133.5mln a year earlier, with second half revenues up 10% to £78.3mln.
WYG said trading in the current financial year is in line with their expectations, with good revenue growth coming though in the UK.
Strong foundations for the future
In an interview with Proactive Investors, Paul Hamer, WYG’s outgoing CEO, said "The order book will continue to grow and expand quite quickly. So I think, In terms of results, another very strong year, really starting to get growth momentum into the group and providing strong foundations for the future.”
Hamer said the group was not sure whether the fourth-quarter slow-down was a result of a “subtle shift in client spending patterns” at the end of the fiscal year, although he does know a number of investors and clients were nervous around the triggering of Article 50 in March which signalled the start of the Brexit process.
Although rather than seeing any projects cancelled, he said the firm’s clients were postponing new work into the start of the current year, and since the year-end, Hamer added, the group has seen general activity levels returning.
Hamer is quitting his role on June 12, so he can take up the post of chief executive at privately-owned construction firm Sir Robert McAlpine Limited with effect from July 31.
In his place, the firm announced the appointment of Douglas McCormick, who until recently was CEO of Sweett Group PLC - the consultancy group taken over last year.
WYG also confirmed the appointment of Jeremy Beeton to succeed Mike McTighe as its chairman with effect from its annual general meeting scheduled for September 21.
Commenting on the new CEO appointment, analysts at ‘house’ broker N+1 Singer said: “While Paul is due significant credit for WYG’s turnaround since 2009, Douglas brings highly relevant experience from his time as Group CEO of Sweett Group and prior to that Group MD, Rail, at Atkins.”
Looking at the results, the analysts added: “After the mixed year end update in March, WYG’s FY17 prelims contain a positive cashflow surprise (net debt of £2.5m vs our £6.0m forecast) but are otherwise in line with expectations.”
They also noted that: “The year end order book was stable at £145m, before the impact of the £50m of contract awards announced last week.
“This provides good underpinning for FY18, notwithstanding some inevitable uncertainty around Thursday’s general election.”
New contract wins provide a boost
Last week, illustrating the rival in the new fiscal year, WYG unveiled deals worth around £50mln over the next three years in the UK and Africa.
It said it has an expanded role as a delivery partner with Ministry of Defence, which could see a doubling in the revenues generated from a tie-up with the MoD’s infrastructure arm.
It is also working with the government’s Crown Commercial Services operation, while in Southern Africa it has landed work with the Climate Resilient Infrastructure Facility.
In a post-results note today, analysts another broker WH Ireland said: “The long-term pipeline of opportunities also looks good, and while WYG has flagged some client hesitancy around the General Election (though Purdah has only ruled out £50m-plus contracts), generally the company appears to have left the Q4 hiatus in the UK behind it.”
Shares hammered after warning
WH Ireland reiterated a ‘buy’ rating and 142.5p target price on WYG shares which are down over 23% in the year to date at 104.5p, having plunged following March’s profit warning.
WYG is a leader in planning, environment and transport consultancy in the UK that works as a trusted advisor to businesses and organisations.
The company says it provides a 'truly differentiated service' rather than a commoditised product.
In Europe, the company does a lot of EU-funded work, while outside of that WYG works hand-in-glove with the British Government on projects in politically fragile emerging countries.
WYG’s expertise in providing societal improvement programmes in some of the world’s harsher economic environments is proving to be a key differentiating factor for the consultancy, leading it to win business in places such as Turkey, Jordan, Libya and Syria.