Shares plunge as WSP feels the pain from public sector cutbacks

Revenue from the company’s UK transport business, which accounts for about half of its operations in the country, fell 30 per cent to £83.3m in 2010 as Britain’s coalition Government cut spending.

The Government is one year into a five-year plan to eliminate the country’s budget deficit, which totalled more than 10 per cent of GDP before they came into office in May 2010.

WSP, which is involved in building bridges and motorways apart from property and infrastructure, said it will undertake further restructuring in the UK, and expects to incur related costs of about £4m.

The company’s projects include the Shard London Bridge, projected to be the tallest skyscraper in the European Union, and the World Trade Center Memorial in New York. “Activity levels here (UK transport business) remain quiet, prompting further restructuring action,” Mike Allen, an analyst with Panmure Gordon & Co said in a note to clients.

He cut his price target on the stock to 300 pence from 356 pence and maintained his ‘hold’ rating.

“It was thought that the private sector could offset these declines; however, recovery ...remains very fragile,” he added.

WSP, which operates in Europe, the United States, Australia, Asia and Africa, pulled out almost all its staff from Libya and temporarily stopped work on contracts there following the political un- rest.

The company, which in May was actively pursuing about £5m due on contracts in Libya , said it would now make a provision in its interim results against its asset exposure in the country.

The profit warning caused shares in WSP, which have fallen 18 per cent since the start of the year, to close down nearly 17 per cent at 260p yesterday.