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WYG expecting strong growth despite end-of-year slowdown

Last updated: 11:09 23 Mar 2017 GMT, First published: 11:27 23 Mar 2016 GMT

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The company provides provides planning, environmental and transport services.

WYG PLC (LON:WYG), the project management and technical consultancy, is set to grow strongly in fiscal 2018 despite fiscal 2017 ending on a duff note.

The company’s shares were hammered in late March after it issued a profits warning, as growth in the UK operations, while still at the sort of level most companies would envy, was not as strong as the company had expected.

Underlying operating profit for the year to the end of March 2017 is still expected to show an impressive near-25% improvement on the previous year, but at somewhere a bit south of £9mln it will be less than previously expected.

Revenue for the year will be in line with market expectations at £150mln, representing year-on-year growth of 13%.

Activity levels in the UK have increased during the year but as a result of the group’s investment in building its UK capacity UK profitability will actually be lower than in the previous year.

On the plus side, the performance of its international operations has been ahead of expectations in both revenue and profit, with the Middle East and North Africa (MENA) region performing particularly strongly.

Speaking to Proactive Investors, Hamer explained the background to the profits revision for the UK operations.

“The important thing to note is that the UK has had a good year, but internally we’ve been gearing up to do even better than we have done,” Hamer said.

“There have been no cancellations, just delays, and it’s too early to discern the reason for it.

“It could be a change in attitudes, sparked by article 50 [Britain’s impending departure from the EU] or it could be a slight and subtle change in spending patterns,” Hamer suggested.

Historically, across both the public and private sector, the first quarter of the calendar year – the final quarter of WYG’s fiscal year – has been the strongest of the year for WYG, because of the “use it or lose it” mentality of those who set spending budgets.

The January-March quarter will still be WYG’s strongest quarter but, anecdotally, there has been evidence of a change in approach by the budget setters, with some now more inclined to allow unused spending to be carried over to the following year.

WYG will get some idea of whether this is the case when its new financial year starts next month, but the final word on the matter may not come until a whole year has passed and year-on-year comparisons can be made.

Hamer said the group is still expecting double-digit percentage growth in the UK in the year to March 2018, and ordinarily would invest in person-power and resources accordingly; that investment may still take place, but WYG intends to give it a few months or so to see how the land lies before pulling the trigger.

“If it starts to normalise then we’ll invest further; if not, then we’ll stand firm,” chief executive Paul Hamer explained to Proactive.

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Getting under the hood

Delving under the bonnet of the business, WYG here in the UK is a leader in planning, environment and transport that works as a trusted advisor to businesses and organisations.

The company says it provides a 'truly differentiated service' rather than a commoditised product.

This is reflected in the margins it garners that tend to be double if not triple those achieved by the engineers further along the supply chain.

In Europe, the company does a lot of EU-funded work. Outside 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.

“It’s a very specialised market. Basically, if you turn on your TV and see on the news some distressing footage of a country suffering extreme hardship, chances are we’re already on the ground, working on alleviating it,” Hamer said.

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on 10/12/18