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WYG Plc  -  WYG   

Half-year Report

Released 07:00 04-Dec-2018

RNS Number : 3017J
WYG Plc
04 December 2018
 

 

4 December 2018

WYG plc ("WYG" or the "Group")

Half Year Report

 

WYG, the international project management and technical consultancy, announces its half year results for the six months ended 30 September 2018.

 

Key points

Financial:

·       Revenue* £75.3m (H1 2017: £76.2m)

·       Adjusted operating profit before tax** £1.1m (H1 2017: £1.0m)

·       Loss before tax £0.8m (H1 2017: £2.8m)

·       Adjusted** earnings per share 1.0p (H1 2017: 1.0p)

·       Interim dividend maintained at 0.6p per Ordinary Share (H1 2017: 0.6p)

·       Net debt as at 30 September 2018 £13.2m (2017: £10.1m) - expected to reduce to c. £10m by year end

 

*Including share of Joint Venture revenues

**Before separately disclosed items of £1.5m (H1 2017: £3.5m) as set out in note 4

 

Operational:

·        Consultancy Services revenues increased to £56.5m (H1 2017: £56.2m) with improved margins

·        International Development impacted by hiatus in onset of new projects in Turkey caused by transition from the IPA I to IPA II# funding instruments; reflected in revenues of £17.6m (H1 2017: £19.3m)

·        Adjusted Group operating margin improved to 1.5% (H1 2017: 1.3%)

·       Efficiency review has started to deliver savings in property, IT, Group central costs; improvements in utilisation; and better use of allowances

·       New international holding company in Netherlands has won first major contracts confirming that it has the ability to bid, win and deliver EU and UK government work

·       Order book of £169.0m at 30 September 2018 (31 March 2018: £166.4m; 30 September 2017: £170.0m) of which c.£62.0m is expected to be delivered by the end of the current financial year (2017: £53.3m):

Consultancy Services £95.4m (2017: £95.9m)

International Development £73.6m (2017: £74.1m)

# Instrument for Pre-Accession Assistance (IPA) Phase II - a component of the EU's Multi-annual Financial Framework 2014-2020

 

Outlook:

·      Consultancy Services expected to deliver further improvement in trading and better margins as ongoing efficiency initiatives take effect

·      Heavy bidding activity in International Development, including for IPA II work, expected to bear fruit in the second half of the year and beyond

·      FY19 guidance remains unchanged and in line with market expectations

·      Underlying business robust and expectation of return to growth in the medium term remains unchanged

 

Douglas McCormick, Chief Executive Officer of WYG, said:

 

"It has been a tough six months but we have delivered results in line with market expectations and we have made substantial progress towards creating a more stable and efficient business platform.

 

"There remains plenty of scope to build on this platform and to develop our business as the UK government continues to invest in infrastructure, housing, and the defence estate, the prime drivers of our UK business; and, through the UK's ring-fenced overseas development budget and the commitment of international financial institutions to expand our international business.

 

"In the past six months I have met a significant number of our clients, completed a second tour of all our major offices and listened to the views of WYG's highly-skilled staff. Their feedback gives me confidence that WYG is a sound business and that we are taking appropriate steps to return it to growth. In the near term, we expect a stronger second half, in line with market expectations and consistent with our long-term seasonal trading pattern."

 

For further information, please contact:

 

WYG plc

Douglas McCormick, Chief Executive Officer

Iain Clarkson, Chief Financial Officer

 

Tel: +44 (0) 113 278 7111

MHP Communications             

Katie Hunt / Ollie Hoare / Pete Lambie

 

Tel: +44 (0) 203 128 8100

N+1 Singer

Sandy Fraser / Rachel Hayes / Justin McKeegan

 

Tel: +44 (0) 207 496 3000

 

 

CHAIRMAN'S STATEMENT

 

Introduction

WYG's overall performance for the half year ended 30 September 2018 was in line with the Board's expectations at the start of the year. Revenue at £75.3m is marginally lower than the comparative period while operating profit (before separately disclosed items) has increased slightly to £1.1m and although net debt has increased to £13.2m, underlying cashflow from operations has improved. The Group's order book has remained stable at £169.0m as at 30 September 2018, and orderbook coverage for the remainder of the current financial year at c.£62m is significantly better than at the same point last year (H1 2017: £53.3m).

 

Our Consultancy Services business has shown revenue growth in almost all areas and is beginning to generate improved margins, as it has started to benefit from our efficiency initiatives. Revenues from International Development reduced as this business continues to be impacted by the transition to the new funding cycle, IPA II1.  Nevertheless, we expect an overall improvement in revenue and margin across both businesses in the second half, consistent with our performance in previous years.

 

Commercial Strategy

The Group operates in two distinct streams, the larger part being Consultancy Services which brings together the five business units which operate both in the UK and internationally in related technical services fields. The other, our International Development business, focuses on projects where we work in collaboration with governments and donor agencies to promote socio-economic stability and trade development to unlock the potential for sustainable development among local communities.

 

We continue to make progress implementing the Group's commercial strategy focussing on three key objectives:

 

Developing a simpler, more robust platform

Having taken steps to simplify, flatten and strengthen the management structure and Board, with the directors of all six business units reporting directly to the CEO, Douglas McCormick, we are seeing improving cohesion and cooperation throughout the Group. At the same time, we have given greater autonomy to the individual businesses with the result that they are increasingly able to be more agile and responsive in their specialist markets.

 

We continue to look closely at those parts of the business which are not performing or where we see insufficient long-term returns. The recent announcement by Toshiba of its decision to liquidate Nugen, and the consequences this has for the proposed new nuclear plant at Moorside and development in the surrounding area, vindicated our decision in March to close the loss-making North Associates business.

 

Driving efficiencies

In the period we have exited one property and relocated two more to achieve reduced costs through better occupancy ratios, energy performance and gearing. IT costs are closely aligned to our property footprint, so these changes also enable us to operate more efficiently whilst maintaining a full service offering to our clients.

 

Looking beyond the fixed costs of property and IT, we have undertaken a wider efficiency review and identified a number of ways in which we can make improvements. These include areas where we can achieve better returns year on year, for example through greater standardisation, better utilisation, working capital practices and identifying and claiming research and development allowances for the innovative work we do for clients. We are also concentrating on those areas where we can make more direct savings such as recruiting new staff, bidding, marketing, travel and Group central and plc associated costs.

 

Returning to growth in the medium term

Working from a more stable and efficient platform means that we can look at opportunities to deploy our specialist skills into new markets and geographies, explore new funding streams and work with new clients such as Whitbread and HM Revenue & Customs.

 

To support that growth, we intend to invest a significant proportion of the money and time generated from efficiencies in new systems, technology and training to transform our business processes to further improve the efficiency and profitability of the business and the quality of our offering to clients.

 

This strategy will provide us with a stronger platform from which to work as a trusted adviser, providing our clients with a broader set of expert consultancy services to enable them to create value, manage risk and make critical investment decisions, and to grow and generate improved returns for our own investors.

 

Business Review

The Consultancy Services business, which accounted for 76.7% of Group revenues, has seen growth in almost all of its main markets, although in some areas this has been at somewhat lower levels than we anticipated at the beginning of the year. The Programme & Project Management (P3M) business was adversely impacted at the operating profit level since, in anticipation of a larger volume of complex work from a major client, we had a number of talented and valuable staff who were underutilised. We have now taken action to address this. In Surveying & Asset Management and Infrastructure & Built Environment, where the planned reduction of lower margin work in Poland has had a beneficial effect, we are seeing improving margins. In Environment, after a slower than expected start, we are now seeing improved activity levels and, based on good order intake in this short horizon business, envisage an improved performance in the second half. Planning & Transport revenues were in line with the prior period but the loss of some senior members of the team during the second half of the last financial year, as previously stated, has adversely impacted operating profit. Our expectation is that this business will also perform better in the second half now that the rate of staff turnover has reduced and new senior staff start to make an impact.

 

Our International Development business, which accounted for 23.3% of Group revenues, continued to experience some frustration at the delays in the flow of new work in Turkey under the IPA II funding instrument. This team has been bidding for a large number of opportunities and expects to see an improvement as these projects come on stream. To date, we have experienced no material impact from the political situation in Turkey.

 

Elsewhere, the UK FCO's Prosperity Fund worldwide evaluation programme and our flagship Climate Resilient Infrastructure Development Facility (CRIDF2) for DfID in Southern Africa continue to ramp up, generating consistent, strong revenues. In Europe, the budget for IPF5 has recently been doubled to €26m. We expect these programmes and some strong prospective opportunities in East Africa to deliver growth in the second half.

 

In line with our Brexit strategy, our recently-created international holding company in the Netherlands has won its first major contracts with new work for the European Investment Bank in the Western Balkans, and for the UK's Foreign & Commonwealth Office, including Monitoring & Evaluation in West Africa and advising on post-hurricane clearance in the British Virgin Islands, confirming that it is underpinning our ability to bid, win and deliver both EU and UK government work.

 

Results

Gross revenue (including our share of Joint Venture revenues) at £75.3m was marginally lower than the comparator period (H1 2017: £76.2m).  Overall, we have seen growth in the primarily UK-based Consultancy Services business offset by reduced revenues in the International Development business as a result of delays in new work coming on line in Turkey during the transition to the IPA II funding instrument.

 

Adjusted operating profit (before separately disclosed items) was £1.1m (H1 2017: £1.0m) representing a slightly improved operating margin (before separately disclosed items) of 1.5% (H1 2017: 1.3%). The efficiency review helped Consultancy Services increase its operating profit in most areas although some of this benefit was eroded by the cost of maintaining increased capacity in certain parts of the business in anticipation of work that did not materialise, and the continuing impact of the departure of certain staff from our Planning & Transport business. We have taken action to address both issues and the rate of staff turnover is now reducing.

 

In the International Development business, lower revenues and higher bidding costs impacted operating margins. In markets where it is not easy to predict with accuracy the timing of work flowing from framework contracts which allow clients to call off large packages of work at relatively short notice, achieving the right balance between managing our cost base and ensuring that we retain key people to win and deliver quality work remains an important area of focus for us.

 

Finance costs at £0.34m (H1 2017: £0.28m) were slightly higher than in the prior period reflecting increased use of our facility with HSBC and the rising interest rate.

 

On a statutory basis, the Group made a loss before tax (after separately disclosed items) of £0.8m (H1 2017: £2.8m) on pre-joint-venture revenues of £74.1m (H1 2017: £75.5m). Separately disclosed items of £1.5m (H1 2017: £3.5m) relate primarily to share option costs and restructuring.

 

Earnings per share adjusted to exclude separately disclosed items were 1.0p (H1 2017: 1.0p).

 

The Group closed the period with net debt of £13.2m (H1 2017: £10.1m). Our cash outlays have included the planned application of £0.5m towards legacy issues (including ongoing commitments on unoccupied offices), dividend payments of £0.4m and c.£1.4m cash costs of restructuring within the Group. Cashflow from the Consultancy Services business was good but offset by the delayed payment of £3.0m within the International Development business on an EU project where the payment had been approved but not received by the period end.

 

Notwithstanding the ongoing efficiency review, we have been able to make some capital investment in upgrades to our offices and IT to support our growth plans.

 

Net cashflow showed an outflow of £7.0m (H1 2017: £7.7m). Cash generation and the effective management of working capital are fundamental to the business and cash conversion continues to be a key performance target for the senior leadership team. In line with previous years' performance, we expect net debt to reduce to around £10.0m at the year end. 

 

Bank facility

Our £35m committed multi-currency revolving credit facility with HSBC runs until September 2022 and offers the Group broad flexibility between debt and bonding requirements.

 

People and Awards

The quality and professionalism of our employees is essential to our success and it has been pleasing to see this recognised through awards made during the period such as British Expertise's Young Consultant of the Year, Young Project Manager of the Year (Association of Project Managers), being shortlisted for Overseas Project of the Year by the Association of Project Managers, and Technology Champion of the Year by the Association for Consultancy and Engineering.

 

We were also proud to receive a Gold Award from the Ministry of Defence as part of its Employer Recognition Scheme (ERS). The MOD's ERS Gold Awards represent the highest award available to companies that employ and support those who serve in the Armed Forces, veterans, and their families.

 

Total headcount as at 30 September 2018 reduced slightly to 1,612 (31 March 2018: 1,641). The net decrease masks the fact that having taken action to close the loss-making North Associates and reduce overcapacity in two business units, we have actually expanded many of our teams in areas where we are seeing growing levels of profitable work and we are seeing signs of reducing rates of staff turnover. Nevertheless, competition for talented staff continues to be intense, especially in the Planning & Transport Planning market.  We continue to pay close attention to our remuneration and reward structures and to work at employee retention and engagement. In this regard we were pleased that shareholders approved the proposal to introduce an all employee Sharesave (SAYE) Plan at the AGM.

 

Dividend

Reflecting the Board's continued confidence in the Group's medium-term prospects and its underlying cashflows, we are declaring a maintained interim dividend of 0.6p per ordinary share (30 September 2017: 0.6p). The interim dividend will be paid on 4 April 2019 to shareholders on the register on 1 March 2019 and WYG shares will trade ex-dividend on 29 February 2019.

 

Board changes

As previously announced, on 25 September 2018 after nine years' service, David Jeffcoat retired from the Board. Neil Masom has taken over as Chairman of the Audit & Risk Committee while Marcia Marini now chairs the Remuneration Committee.  

 

Outlook

These results, while in line with market expectations, reflect a challenging first half in which the flow of work tendered by government departments and agencies under major frameworks has been difficult to predict accurately and the cost of bidding has gone up as a result of the increasing number of challenges to tender awards.  In addition, we continue to experience tough competition for talent, especially in our Planning businesses.

 

We anticipate a stronger second half both from trading, reflecting our usual seasonal profile, and from the steps we have been taking to improve profitability. We anticipate further improvements in Consultancy Services which has performed better in the second quarter and should carry this momentum into the second half. Internationally, we also expect a much improved performance as, in Turkey, new work comes on stream under the IPA II funding programme, while the major projects we are delivering for the UK FCO and DfID continue to gather pace.

 

The opportunities we can see in all our target markets continue to give us confidence for the future and, having ensured that we can bid, win and deliver EU work regardless of the outcome of negotiations on Brexit, we are confident of our ability to continue to win good quality work.

 

Accordingly, we expect a full year performance in line with current market expectations, while continuing to invest in the business to support future growth.

 

 

Jeremy Beeton

Chairman

4 December 2018

 

__________________________________

1 Instrument for Pre-Accession Assistance (IPA) – Phase II - a component of the EU’s Multi-annual Financial Framework 2014-2020.

 

 

 

 

BUSINESS REVIEW  

Operationally, the Group is structured, and reports, as two principal business streams: Consultancy Services and International Development.

 

Consultancy Services (76.7% of Group Revenue)

The Consultancy Services business stream revenue (including its share of Joint Venture revenues) increased to £57.7m (H1 2017: £56.9m) and delivered an improved operating profit before separately disclosed items and central overheads of £2.7m (H1 2017: £1.6m).

 

WYG Consultancy Services provides expertise in a broad range of services in property, assets and infrastructure, which makes us well positioned to take advantage of growing opportunities in our markets.  Since April 2018, we have been operating as five units: Infrastructure & Built Environment, Programme & Project Management (P3M), Surveying & Asset Management, Environment, and Planning & Transport.

 

In Infrastructure & Built Environment, our civil & structural, mechanical & electrical and highways teams continue to see good opportunities in the nuclear, defence, commercial, education, health and transportation markets where innovative and efficient methods of delivering our services such as BIM (Building Information Modelling) make a difference to the quality and cost of our technical services. We have major projects for the Northern Ireland Health & Social Care Trust and Public Health England, and our highways team has recently been appointed to the Highways England framework for work in the Midlands and East of England as it starts to deliver on the UK government's Road Investment Strategy. This team is also working closely with colleagues in our Transport Planning business on several projects for West Yorkshire Combined Authority. Our Polish business is delivering feasibility studies for a number of new rail projects and we are looking at ways of improving collaboration between our UK and Polish colleagues in this area.  We maintain a strong presence across a broad range of projects and activities at Sellafield and on the biggest single decommissioning contract outside Sellafield with our work in support of James Fisher Nuclear Ltd in its four-year contract with Magnox to undertake decommissioning activities on the Steam Generating Heavy Water Reactor in Dorset. This positions us well for emerging opportunities in nuclear decommissioning across the UK. 

Our Programme & Project Management (P3M) team provides a broad range of Programme, Project and Cost Management services on UK and international projects. This is delivered through a sector focus on Social & Economic Infrastructure, Residential & Commercial Development and Security, Justice & Defence. In the UK, we are delivering award winning programmes as part of the Army rebasing from Germany and a significant infrastructure investment to support the US Visiting Forces military capability. We are working on the UK housing agenda across the residential sector from Homes England to private sector homebuilders and social housing clients. We are also supporting the All-Party Parliamentary Group on Building Communities, which focuses on the human dimension to infrastructure investment. In Northern Ireland, we are developing the Royal Belfast Hospital for Sick Children and the award-winning Strule Shared Education Campus in Omagh. Our work with the UK Foreign and Commonwealth Office continues to grow with Embassy redevelopment projects in Canada, Nigeria and Mozambique. Our broader work supporting UK interests overseas has seen our disaster recovery teams providing hurricane relief support in the British Virgin Islands and Anguilla. We now have infrastructure advisors working in these overseas territories and continue our long-standing support of UK military capability and training on large infrastructure programmes in Kenya, the Middle East, Arabian Gulf, Belize and the Falkland Islands.

 

Our Surveying & Asset Management business combines our building surveying, geospatial, facilities and asset management consultancy as well as our compliance consultancy (consisting of project safety, engineering compliance, workplace and fire consultancy) services. The business continues to grow a mixed portfolio of blue-chip clients through transferable services across a range of sectors.  Significant framework wins in the first half of the year for the Whitbread Group and HMRC has bolstered the forward pipeline of work.  Our surveying and asset management team also deliver on many longstanding framework contracts for the Ministry of Justice, Surrey County Council, Peel Ports, NDA, Royal Mail and the Wates Group to name just a few, while internationally we support FCO Services and a major telecoms provider on their asset portfolios around the world. In all this work we are actively developing ways of digitising parts of our core service offering, generating efficiencies and competitive advantage using our Asset Data Solutions (ADS) software, with modules now incorporating ADS Capture, ADS Fire and ADS Safety. Our nuclear capability, built on a 30-year presence in nuclear in West Cumbria, gives us strength and depth in the highly specialist nuclear decommissioning market. Whilst the recent announcement by Toshiba that it is liquidating its subsidiary Nugen, with inevitable consequences for the Moorside Nuclear new build, is disappointing, we remain confident that nuclear will continue to be an important part of the energy supply chain for the foreseeable future. 

 

Whilst liability management and residential and mixed-use development remain the major sources of the advisory work done by our Environment business, infrastructure, in particular in highways, rail and flood defence, is a growing source of opportunities. In all these areas we bring a good track record and our sustainability principles together to inform master planning and design.  Our work on the Perry Barr Development in Birmingham, which will also be used for the 2022 Commonwealth Games, is increasing. We are also working for York City Council on the 72-hectare York Central Enterprise Zone (a proposal to incorporate up to 25,000 houses and 100,00m2 of commercial space), on the proposed expansion of Stansted Airport and continue to deliver a large portfolio of work for National Grid, Homes England and on HS2. Further afield, we have advised on the environmental and health related impacts of various options for the route of the proposed gas pipeline from Nigeria to Morocco.

 

With more than 200 staff across our Planning & Transport practices, we are the UK's third largest planning consultancy by revenue, ranked first in brownfield housing development and are amongst the top performers in all the principal sectors in which we operate. In May 2018, we were pleased to add to our specialist capabilities with the acquisition of the sports planning consultancy, Neil Allen Associates Limited. The UK government remains committed to increasing the volume and rate of residential construction and we are working on numerous proposals for large scale residential developments (such as the masterplanning for 1,250 house Brookfield Garden Village) which, if completed today, would see more than 150,000 houses added to the UK housing stock. Our Transport practice has won several new projects for West Yorkshire Combined Authority and they are also working closely with our Warsaw and Kraków teams to combine our transport modelling and design skills on projects in both the UK and Poland. The team is also combining with our International Development business to build state of the art public transport systems and improved traffic management in developing cities in Africa and other parts of the world, bringing together our socio-economic and technical skills to deliver much needed infrastructure development.

 

The duty of care expertise developed by our P3M teams working with the MoD overseas and by the Surveying & Asset Management teams with FCO Services, providing support across a geographically diverse asset portfolio, enables us to consider locations and projects in similarly tough environments in other areas of the business meaning that colleagues have been able to deploy to Mogadishu and Kismayo in Somalia, Anguilla to assist in post-hurricane work, Baghdad, Bamoko in Mali, and Northern Nigeria.

 

A significant proportion of our work draws on more than one of these disciplines and we are constantly looking at ways to maximise the opportunities that our combined expertise affords, while delivering a seamless and frictionless experience for our clients and we were pleased, therefore, to achieve accreditation to ISO 44001 - Collaborative Business Relationship Management Systems. This helps business partners maximise the value of collaborative working. Our accreditation relates to our enterprise with Defence Infrastructure Organisation for Salisbury Plain Training Area, Service Family Accommodation.

 

As we look to the future, we expect our strategic focus on greater efficiency, standardisation and digitisation across the business to generate significant benefits, both across the Consultancy Services business and the broader Group.

 

As at 30 September 2018, the Consultancy Services business's order book stood at £95.4m (31 March 2018: £96.1m).

 

International Development (IDB) (23.3% of Group Revenue)

The International Development business saw a decrease in revenue to £17.6m (H1 2017: £19.3m), mainly as a result of delays in new work coming on line in Turkey, caused by the transition from the IPA I funding instrument to IPA II. Operating profit before separately disclosed items and central overheads reduced to £0.2m (H1 2017: £1.3m) reflecting lower revenues and the increased costs of a period of intense bidding for major programmes of work on which we have incurred costs but work has not yet started.   

 

This business generates most of its revenue from socio-economic, technical and engineering programmes, the majority of which are funded under the Instrument for Pre-Accession Assistance (IPA) in Turkey, the European Development Fund (EDF) for African, Caribbean and Pacific states as well as the UK Department for International Development (DfID).   The International Development business offers a range of services under the following sectors:

·      Public Financial Management (PFM) & Governance

·      Monitoring, Evaluation & Learning

·      Human Resources & Social Development

·      Climate Change & Adaption

·      Infrastructure & Advisory Services

 

The PFM Division has been delivering a longstanding programme of projects in Nigeria including the PFM component of the "State Partnership for Accountability Responsiveness and Capacity (SPARC)" programme with a value of €6 million. Our Monitoring, Evaluation & Learning (MEL) team has seen a significant increase in work on the multi-million pound evaluation programme of the UK FCO's globally-operating Prosperity Fund Programme now that the inception phase is complete and the delivery phase is well under way. This important FCO evaluation programme reinforces WYG's strength in the niche MEL sector and greatly expands our regional presence into South America and SE Asia. The MEL Division's recent win of the CSSF West Africa MEL Framework will facilitate market entry in West Africa by providing intelligence and references.

 

The Human Resources & Social Development Division is focused on delivering programmes mainly in Turkey, where it maintains its market-leading position, designed for institutional capacity building, education, employment and social inclusion. This team has been engaged in a phase of heavy bidding activity which we expect to convert into increased volumes of work in the second half. In Africa, we also work closely with the Danish Refugee Council on a number of programmes aimed at mitigating the drivers for, and impact of, migration including "Building Opportunities for Resilience in the Horn of Africa (BORESHA)", a programme funded by the EU Emergency Trust Fund.

 

In Southern Africa, our Climate Change & Adaptation Division has been working to deliver dozens of projects under the £22.7m Climate Resilient Infrastructure Facility II (CRIDF II), a major donor funded programme to improve the sustainable, equitable use of Southern Africa's transboundary water resources and the Sustainable Agriculture Intensification Research and Learning in Africa (SAIRLA) programme which is a five-year, £8m programme aimed at delivering more effective policies and investments in sustainable agricultural intensification.

 

Underpinned by funding from the IPA  II programme, which has a €1.2bn projected spend in the Western Balkans and Turkey,  our Infrastructure & Advisory Services team has seen a significant increase in revenue, mainly through the EIB funded Western Balkans Infrastructure Facility (WBIF) programme - where WYG either inputs or leads on programmes focusing on project preparation in the energy, transport, environment and social infrastructure sectors.  The budget for one of these programmes, IPF5 which is led by WYG, has recently been increased from €13m to €26m. We are bidding on similar Facility opportunities with the EIB beyond the Western Balkans to also include other regions in the Middle East and North Africa. Our recent win of a World Bank funded project in Ethiopia to prepare an Intelligent Transport System Masterplan for the capital Addis Ababa (€3m) is the third mobility planning contract in the region and demonstrates the relevance of these skills in emerging economies.

 

The Infrastructure & Advisory Services Division also maintains its leading position in the water & waste water sector in Turkey and is making progress diversifying into soft environment (e.g. climate change, agro-environment, environmental impact assessment, eco labelling), transport, energy and other sectors in Turkey, Jordan and Lebanon.

 

At 30 September 2018, the International Development business's order book had increased to £73.6m (31 March 2018: £70.3m). The Turkish business, in particular, has been involved in an intense phase of bidding as projects under IPA II are tendered. As a market leader in many of the relevant disciplines, with more than 20 major bids currently awaiting adjudication and 50 opportunities in preparation or under consideration, we expect to receive several new awards to replenish and grow the orderbook over the coming months. Overall, after a slower than anticipated start to the year, we expect a significant improvement throughout the remainder of this financial year and beyond.

 

 

Unaudited consolidated income statement

For the six months ended 30 September 2018

 

 

 

 

Six months ended 30 September 2018

 

         Six months ended 30 September 2017

 

Year ended

31 March 2018

Audited

 

 

Notes

£'000

£'000

£'000

Continuing operations

 

 

 

 

Revenue including share of joint venture revenues

 

75,287

76,231

154,351

Less share of joint venture revenues

 

(1,204)

(755)

(1,500)

Revenue

5

74,083

75,476

152,851

Operating expenses

 

(74,665)

(78,012)

(157,700)

Share of result of joint ventures

 

169

40

88

Operating loss*

 

(413)

(2,496)

(4,761)

Finance costs

6

(342)

(283)

(587)

Loss before tax

 

(755)

(2,779)

(5,348)

Tax

7

-

-

336

Loss for the period, attributable to the owners of the parent

 

(755)

(2,779)

(5,012)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share

8

 

 

 

Basic

 

(1.0p)

(3.8p)

(6.9p)

Diluted

 

(1.0p)

(3.8p)

(6.9p)

 

* Operating loss includes a number of items that are separately disclosed in note 4.

The accompanying notes to the Half Year Report are an integral part of this consolidated income statement.

 

 

Unaudited consolidated statement of comprehensive income

For the six months ended 30 September 2018

 

 

 

 

Six months

ended 30

September

2018

 

Six months

ended 30

September

2017

 

Year to

31 March

 2018

Audited

 

 

 

£'000

£'000

£'000

Loss for the period

 

(755)

(2,779)

(5,012)

Other comprehensive income:

 

 

 

 

Currency translation differences*

 

169

435

390

Other comprehensive income for the period

 

169

435

390

Total comprehensive expense for the period

 

(586)

(2,344)

(4,622)

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive expense attributable to the owners of the parent

 

(586)

(2,344)

(4,622)

 

* These items might be reclassified subsequently to the income statement

 

 

 

Unaudited consolidated balance sheet

As at 30 September 2018

 

 

 

 

 

As at

30 September

2018

 

As at

30 September

2017

 

As at

31 March

2018

Audited

 

 

Notes

£'000

£'000

£'000

Non-current assets

 

 

 

 

Goodwill

 

18,278

18,193

18,193

Other intangible assets

 

3,471

6,491

3,663

Property, plant and equipment

 

4,470

3,756

4,277

Investments in Joint Ventures

 

655

553

737

Deferred tax assets

 

1,244

1,293

1,173

 

 

28,118

30,286

28,043

Current assets

 

 

 

 

Work in progress

 

30,636

36,950

23,722

Trade and other receivables

 

24,416

26,656

27,697

Current tax assets

 

605

125

213

Cash and cash equivalents

 

5,833

5,944

4,750

 

 

61,490

69,675

56,382

Current liabilities

 

 

 

 

Trade and other payables

 

(40,465)

(46,465)

(40,512)

Current tax liabilities

 

(205)

(304)

(304)

Financial liabilities

10

(14,000)

(11,000)

(6,000)

 

 

(54,670)

(57,769)

(46,816)

Net current assets

 

6,820

11,906

9,566

Non-current liabilities

 

 

 

 

Financial liabilities

10

(5,000)

(5,000)

(5,000)

Retirement benefit obligation

 

(1,719)

(1,983)

(1,851)

Deferred tax liabilities

 

(1,426)

(1,980)

(1,390)

Provisions, liabilities and other charges

 

(3,297)

(5,127)

(3,807)

 

 

(11,442)

(14,090)

(12,048)

Net assets

 

23,496

28,102

25,561

Equity attributable to the owners of the parent

 

 

 

 

Share capital

 

78

78

78

Hedging and translation reserve

 

2,054

1,930

1,885

Retained earnings

 

21,364

26,094

23,598

Total equity

 

23,496

28,102

25,561

 

 

 

 

 

 

 

 

 

Unaudited consolidated statement of changes in shareholders' equity

For the six months ended 30 September 2017

 

 

 

Share

capital

Hedging and

translation

reserve

 

Retained

earnings

 

 

Total equity

 

£'000

£'000

£'000

£'000

Balance as at 1 April 2017 (Audited)

75

1,495

30,004

31,574

Loss for the period

-

-

(2,779)

(2,779)

Other comprehensive income/(expense):

 

 

 

 

Currency translation differences

-

435

-

435

-

435

-

435

Total comprehensive income/(expense) for the period

-

435

(2,779)

(2,344)

Issue of shares

3

-

-

3

Share based payments

-

-

(280)

(280)

Dividends

-

-

(851)

(851)

78

1,930

26,094

28,102

 

 

 

For the six months ended 31 March 2018

 

 

Share

capital

Hedging and

translation

reserve

Retained

earnings

Total

 equity

 

£'000

£'000

£'000

£'000

Balance as at 1 October 2017

78

1,930

26,094

28,102

Loss for the period

-

-

(2,233)

(2,233)

Other comprehensive expense:

 

 

 

 

Currency translation differences

-

(45)

-

(45)

-

(45)

-

(45)

Total comprehensive expense for the period

-

(45)

(2,233)

(2,278)

Share based payments

-

-

207

207

Purchase of treasury shares

-

-

(33)

(33)

Dividends

-

-

(437)

(437)

78

1,885

23,598

25,561

 

Unaudited consolidated statement of changes in shareholders' equity (continued)

 

For the six months ended 30 September 2018

 

 

 

Share

capital

Hedging and

translation

reserve

Retained

earnings

Total

 

£'000

£'000

£'000

£'000

Balance at 1 April 2018 (Audited)

78

1,885

23,598

25,561

Impact of adoption of IFRS15 (note 3)

-

-

(819)

(819)

Adjusted balance as at 1 April 2018

78

1,885

22,779

24,742

Loss for the period

-

-

(755)

(755)

Other comprehensive income:

 

 

 

 

Currency translation differences

-

169

-

169

Other comprehensive income for the period

-

169

-

169

Total comprehensive income/(expense) for the period

-

169

(755)

(586)

Share based payments

-

-

212

212

Dividends

-

-

(872)

(872)

Balance at 30 September 2018

78

2,054

21,364

23,496

 

 

 

Unaudited consolidated cash flow statement

For the six months ended 30 September 2018

 

 

 

Six months

ended 30

September

2018

 

 

Six months

ended 30

September 2017

 

Year ended

31 March

 2018

Audited

 

 

Note

£'000

£'000

£'000

Operating activities

 

 

 

 

Cash (used in)/generated from operations

11

(4,776)

(5,727)

1,158

Interest paid

 

(297)

(184)

(475)

Tax paid

 

(334)

(48)

(361)

Net (cash used)/generated from in operating activities

 

(5,407)

(5,959)

322

 

 

 

 

 

Investing activities

 

 

 

 

Purchases of property, plant and equipment

 

(904)

(1,226)

(2,509)

Purchases of intangible assets (computer software)

 

(38)

(49)

(173)

Purchase of businesses (net of cash acquired)

 

(199)

(28)

(230)

Net cash used in investing activities

 

(1,141)

(1,303)

(2,912)

 

 

 

 

 

Financing activities

 

 

 

 

Issue of shares

 

-

3

3

Purchase of treasury shares

 

-

(33)

(33)

Drawdown of loan

 

8,000

7,000

2,000

Dividends paid to company shareholders

 

(436)

(419)

(1,270)

Net cash generated from financing activities

 

7,564

6,551

700

Net increase/(decrease) in cash and cash equivalents

 

1,016

(711)

(1,890)

Cash and cash equivalents at beginning of period

 

4,750

6,518

6,518

Effects of foreign exchange rates on cash and cash equivalents

 

67

137

122

Cash and cash equivalents at end of period

12

5,833

5,944

4,750

1. Company details

WYG plc is incorporated in the United Kingdom under the Companies Act and is registered in England & Wales with registered number 1869543. The address of its registered office is Arndale Court, Otley Road, Headingley, Leeds LS6 2UJ. The Company's ordinary shares are traded on AIM, a market operated by the London Stock Exchange plc.

The principal activity of the Group in the period under review was that of international multi-skilled consultant. The Group's revenue derives mainly from activities in the UK, Eastern Europe and Middle East & North Africa.

2. Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 September 2018 should be read in conjunction with the financial statements for the period ended 31 March 2018, which are available on the Company's website at www.wyg.com, and have been prepared in accordance with IFRSs as adopted by the European Union. While the financial figures included in this half-yearly report have been computed in accordance with the recognition and measurement principles of IFRSs, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

This condensed consolidated interim financial information was approved for issue on 4 December 2018.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2018 were approved by the Board of Directors on 5 June 2018 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial information has neither been reviewed nor audited by the Auditors.

3. Accounting policies

The Group has applied the following revised standards from 1 April 2018:

IFRS 9 Financial instruments.
IFRS 9 Financial instruments was adopted from the beginning of this period. As disclosed in the 2018 Annual Report, there was no quantitative impact on the Group upon adoption.

 

IFRS15 - Revenue from contracts with customers. 

During the period, the review of the adoption of IFRS 15 Revenue from contracts with customers was concluded and adopted from the beginning of this period. As disclosed in the 2018 Annual Report, no material changes were identified in the way that revenue on contracts with customers was recognised. Historically, certain pre-contract costs on bids in relation to international projects were capitalised once it was probable that the contract was secured. These costs were then amortised over the life of the contract. At 31 March 2018 this amount totalled €0.9m. IFRS15 allows for the capitalisation of these costs only if they are incremental and are expected to be recovered. The costs previously capitalised do not meet these stricter requirements and hence an adjustment has been made.

IFRS15 has been adopted through the 'modified retrospective adoption' approach and as such a cumulative catch up adjustment of £0.8m has been booked to the opening balance sheet without altering comparatives.

 

Except for the above, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2018, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.

4. Detailed consolidated income statement

 

Revenue including share of joint venture revenues

Operating profit/(loss)

 

 

 

Profit/(loss) before tax

 

£'000

£'000

£'000

Six months ended 30 September 2018

 

 

 

Before separately disclosed items

75,287

1,107

765

Separately disclosed items

-

(1,520)

(1,520)

Total

75,287

(413)

(755)

Six months ended 30 September 2017

 

 

 

Before separately disclosed items

76,231

1,018

735

Separately disclosed items

-

(3,514)

(3,514)

Total

76,231

(2,496)

(2,779)

Year ended 31 March 2018

 

 

 

Before separately disclosed items

154,351

3,506

2,919

Separately disclosed items

-

(8,267)

(8,267)

Total

154,351

(4,761)

(5,348)

 

Details of separately disclosed items

 

Six months

ended 30

September

2018

 

Six months

ended 30

September 2017

Year ended

31 March

 2018

 

£'000

£'000

£'000

Share option (costs)/credit

(272)

400

251

Amortisation of acquired intangible assets

(262)

(752)

(1,160)

Impairment of intangible assets

-

-

(2,406)

Other costs

(986)

(3,162)

(4,952)

Separately disclosed items

(1,520)

(3,514)

(8,267)

 

The Group has incurred a number of items in the period and in the prior year, whose significance is sufficient to warrant separate disclosure. The key elements included within separately disclosed items are:

·      Period charge in relation to share option costs

·      Period charge for the amortisation of acquired intangibles

·      Items included in other costs relate to the implementation of the strategic growth plan and to restructuring actions. Prior year also include legacy claims relating to non-continuing business and refinancing fees.

 

4. Detailed consolidated income statement (continued)

 

Details of separately disclosed items (continued)

 

The Directors believe that the operating profit before separately disclosed items gives a better view of underlying trading for the Group and enables the user of the accounts to more accurately understand the Group's performance. Although the share option costs and amortisation of intangible assets are charges which occur annually, the Directors excluded those charges from operating profit before separately disclosed items because their value is significant and they are not related to the underlying performance of the business. The other charges in the year are expected to be one off in nature. Consequently, the Directors believe it is appropriate to exclude them from operating profit before separately disclosed items.

 

5. Segmental information

IFRS 8 requires segment reporting to be based on the internal financial information reported to the chief operating decision maker. The Group's chief operating decision maker is deemed to be the executive management team comprising the Chief Executive Officer and the Chief Financial Officer. Its primary responsibility is to manage the Group's day to day operations and analyse trading performance.

 

The business is organised to focus on the strengths of our consultancy services and international development business. The Group's segments are detailed below and are those segments reported in the Group's management accounts used by the executive management team as the primary means for analysing trading performance. The Executive management team assesses profit performance using operating profit measured on a basis consistent with the disclosure in the Group accounts.

 

The Group's operations are managed and reported by key technical segments as follows:

·              Consultancy Services

·              International Development

The segmental results for the six months ended 30 September 2018 are as follows:

 

 

 

Consultancy Services

International Development

Group

 

 

£'000

£'000

£'000

 

 

 

 

 

Revenues including share of joint venture revenues

 

57,716

17,571

75,287

Less share of joint venture revenues

 

(1,204)

-

(1,204)

 

 

56,512

17,571

74,083

Result

 

 

 

 

Operating profit before central overheads and separately disclosed items

 

2,702

152

2,854

Central overheads

 

 

 

(1,747)

Operating profit before separately disclosed items

 

 

 

1,107

Separately disclosed items (Note 4)

 

 

 

(1,520)

Operating loss

 

 

 

(413)

Finance costs

 

 

 

(342)

Loss before tax

 

 

 

(755)

Tax

 

 

 

-

Loss for the period

 

 

 

(755)

 

Loss attributable to the owners of the parent

 

 

 

(755)

 

 

5. Segmental information (continued)

 

The segmental results for the six months ended 30 September 2017 are as follows:

 

 

 

Consultancy Services

International Development

Group

 

 

£'000

£'000

£'000

 

 

 

 

 

Revenues including share of joint venture revenues

 

56,935

19,296

76,231

Less share of joint venture revenues

 

(755)

-

(755)

 

 

56,180

19,296

75,476

Result

 

 

 

 

Operating profit excluding central overheads and separately disclosed items

 

1,625

1,257

2,882

Central overheads

 

 

 

(1,864)

Operating profit before separately disclosed items

 

 

 

1,018

Separately disclosed items (Note 4)

 

 

 

(3,514)

Operating loss

 

 

 

(2,496)

Finance costs

 

 

 

(283)

Loss before tax

 

 

 

(2,779)

Tax

 

 

 

-

Loss for the period

 

 

 

(2,779)

 

Loss attributable to the owners of the parent

 

 

 

(2,779)

 

6. Finance costs

 

Six months

ended 30

September

2018

 

Six months

ended 30

September 2017

Year ended

31 March

 2018

 

£'000

£'000

£'000

Interest on bank loans, guarantees, bonds and overdrafts

342

283

587

Total finance costs

342

283

587

 

7. Tax

The tax charge for the period has been calculated by applying the Directors' best estimate of the effective tax rate for the year with consideration to the geographic location of the profits, to the profit before tax for the period.

 

8. (Loss)/earnings per share

The calculation of the basic and diluted loss per share is based on the following data:

 

Six months

ended 30

September

2018

 

Six months

ended 30

September 2017

Year ended

31 March

 2018

 

£'000

£'000

£'000

Earnings for the purposes of basic and diluted earnings per share being loss for the year

(755)

(2,779)

(5,012)

Adjustment relating to separately disclosed items (see note 4)

1,520

3,514

8,267

Tax impact of separately disclosed items

-

-

(10)

Earnings for the purposes of basic and diluted adjusted earnings per share

765

735

3,245

 

 

Six months

ended 30

September

2018

Six months ended 30

September

2017

Year ended

31 March

 2018

 

Number

Number

Number

Number of shares

 

 

 

Weighted average number of shares for basic earnings per share

72,748,964

72,729,665

72,729,665

Effect of dilutive potential ordinary shares:

 

 

 

    Share options

1,369,100

1,037,600

1,049,173

Weighted average number of shares for diluted earnings per share

74,118,064

73,767,265

73,778,838

 

 

 

 

 

Loss per share

 

 

 

Basic

(1.0p)

(3.8p)

(6.9p)

Diluted

(1.0p)

(3.8p)

(6.9p)

 

 

 

 

Adjusted earnings per share

 

 

 

Basic

1.0p

1.0p

4.5p

Diluted

1.0p

1.0p

4.4p

The adjusted earnings per share is calculated after excluding separately disclosed items. This more accurately reflects the underlying performance of the Group.

Share options that could potentially dilute basic earnings per share in the future were not included in the calculation of diluted earnings per share because they are antidilutive. 

9. Dividends

The interim dividend of 0.6p per share (2017: 0.6p per share) was approved on 28 November 2018 and will be paid in April 2019. This is not recognised as a liability in this half year report.

The final dividend of 1.2p per share for the year ended 31 March 2018 was approved by the shareholders at the Annual General Meeting on 25 September 2018 and was paid on 3 October 2018. This was not recognised in the financial statements for the year ended 31 March 2018 but is recognised as a liability in this half year report.

 

10. Financial liabilities

 

30

September

2018

 

30

September 2017

31 March

 2018

 

£'000

£'000

£'000

Current

 

 

 

Bank loans and overdrafts

14,000

11,000

6,000

 

14,000

11,000

6,000

Non-current

 

 

 

Bank loans

5,000

5,000

5,000

 

5,000

5,000

5,000

 

 

 

 

Financial liabilities are repayable as follows:

 

 

 

On demand or within one year

14,000

11,000

6,000

Greater than one year

5,000

5,000

5,000

 

19,000

16,000

11,000

 

11. Cash (used in)/generated from operations

 

Six months

ended 30

September

2018

 

Six months ended 30

September

2017

 

 

Year ended

31 March

 2018

 

 

£'000

£'000

£'000

Loss from operations

(413)

(2,496)

(4,761)

Adjustments for:

 

 

 

Depreciation of property, plant and equipment

715

657

1,331

Amortisation of intangible assets

390

885

3,832

Loss on disposal of property, plant and equipment

2

-

100

Share options expense/(credit)

272

(400)

(251)

Operating cash flows before movements in working capital

966

(1,354)

251

(Increase)/decrease in work in progress

(6,738)

(6,964)

6,822

Decrease in receivables

3,591

3,667

2,927

Decrease in payables

(2,595)

(1,076)

(8,842)

Cash (used in)/generated from operations

(4,776)

(5,727)

1,158

 

12. Analysis of net (debt)/cash

 

At 1 April

2017

Cash flows

Other

non-cash

items

At 30

September

2017

 

£'000

£'000

£'000

£'000

Cash and cash equivalents

6,518

(711)

137

5,944

Bank loans and overdrafts

(9,000)

(7,000)

-

(16,000)

Net (debt)/cash

(2,482)

(7,711)

137

(10,056)

Add back cash in restricted access accounts

(1,214)

521

(36)

(729)

Unrestricted net (debt)/cash

(3,696)

(7,190)

101

(10,785)

 

At 1 April

2018

Cash flows

Other

non-cash

items

At 30

September

2018

 

£'000

£'000

£'000

£'000

Cash and cash equivalents

4,750

1,016

67

5,833

Bank loans and overdrafts

(11,000)

(8,000)

-

(19,000)

Net (debt)/cash

(6,250)

(6,984)

67

(13,167)

Add back cash in restricted access accounts

(1,296)

374

(19)

(941)

Unrestricted net (debt)/cash

(7,546)

(6,610)

48

(14,108)

Restricted cash relates to restricted access accounts in WYG International B.V.

Other non-cash movements represent currency exchange differences.

 

13. Business combination

In May 2018, WYG Environment Planning and Transport Limited, a wholly owned subsidiary of the Group, acquired 100% of the share capital of Neil Allen Associates Limited, a sports planning business based in the North West of England. The total consideration was £297,000, of which £28,000 was contingent and was subsequently paid on the collection of certain working capital balances. The fair value of the assets acquired was £212,000, including acquired intangible costs of £146,000. Goodwill of £85,000 arose on acquisition.

14. Related party transactions

There have been no changes in the nature of related party transactions as described in the 2018 Annual Report and Accounts and there have been no new related party transactions which have had a material effect on the financial position or performance of the Group in the period ended 30 September 2018.

15. Availability of the Half Year Report

Copies of the Half Year Report can be obtained from the Company's registered office at Arndale Court, Otley Road, Headingley, Leeds LS6 2UJ, and on the Company's website: www.wyg.com.

 

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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