Blackfriar: Painful journey comes to an end as WYG bounces back

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THIS time two years ago design and engineering consultancy WYG looked like a basket case.

It had just announced another capital restructure to rebalance its finances – just two years after the first one, leaving long suffering shareholders with a hefty dilution of their stakes.

Back in 2009 when the Leeds-based company first did this, a debt-for-equity swap left its lenders Lloyds, Royal Bank of Scotland and Fortis holding 60.5 per cent of its shares.

Shareholders were left with 15 per cent of its equity and an employee benefit trust took the remaining 24.5 per cent.

At the time, WYG’s management hailed the capital restructure as a new dawn for the company.

But two years later WYG returned to the markets to raise £30m from new shareholders through a placing in what was make or break for the company.

WYG, formerly called White Young Green, has been on a painful restructuring journey, including hundreds of job losses and office closures.

It bought 38 companies between 1997 and 2007, leaving it with a hefty debt burden.

But this week marked a return to solid health with the second profits upgrade this year. The group said it expects to beat profit forecasts this year following some impressive new contract wins with the Ministry of Defence and the housebuilding sector.

WYG is involved in the six-year programme to repatriate British forces back from Germany to the UK.

It is also working on a number of major projects in Afghanistan where it has won a significant two-year contract with the MoD to help run Camp Bastion, the main military base.

The contract’s value is confidential, but analysts estimate it to be worth £5m to £10m.

WYG is working alongside a multi-disciplinary team made up of 60 Royal Engineers to manage both the camp and other Afghan operating bases. Troops based at Claro Barracks in Ripon have played a major role at the camp.

The firm is also winning planning work, boosted by the increase in activity in the construction and housebuilding sector.

WYG’s chief executive Paul Hamer said: “Three of the major UK housebuilders – Persimmon, Wimpey and Barratt – have moved back into our top 20 client list.

“The Government’s budget stimulus has definitely boosted confidence in the housebuilding sector.”

WYG is also winning work in the energy sector including decommissioning nuclear power stations and counts Sellafield as one of its major clients as well as the Magnox sites and Hinkley.

However, like many companies that are enjoying strong growth at the moment, it is not reliant on the UK.

The UK market accounts for around 60 per cent of revenue, but over the coming years WYG expects to see the international business play a bigger role.

Mr Hamer believes that 50 per cent UK/ 50 per cent international would be a sustainable position going forward.

An interesting sideline for the company is new work in areas that have been hit by conflict.

The group is supporting clients across parts of Africa, which it can’t name, and some Middle East states where it is working with the MoD and the International Department of Development, helping them to re-stabilise fragile and conflict affected states.

“We’re following UK PLC into these countries. The MoD has a military programme. We look after everything else. We try to make their operations function as effectively as possible,” said Mr Hamer.

The group has also won work in Southern Africa, Bulgaria, Uzbekistan and the Western Balkans, including a large-scale project to advise SMEs in Croatia.

The group said that in light of this positive recent trading it expects profits to exceed expectations – the second profits upgrade this year following the update in June.

James Tetley, at N+1 Singer, welcomed the update: “WYG’s trading update confirms a strong start to the year, ahead of our expectations.

“Notably, the update highlights modest revenue growth year to date, reversing the negative trend of recent years. The return to top line growth has come through sooner than we expected and therefore we are upgrading our forecasts for the third time this year, an indication of the momentum building within the group.”

Analyst Nick Spoliar, at WH Ireland, added: “The stand-out feature of the update is that having fought the fight effectively on costs and strongly refocused the group’s strategy, WYG has now succeeded in moving the business into the growth mode – and growth notwithstanding vigorous cutting back of unproductive sales earlier.”

WYG’s long suffering shareholders are finally seeing the company make good on its promises.