Milestone for WYG as group returns to the black

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DESIGN and engineering consultancy WYG has returned to profit, marking what the group described as a “very significant milestone” in its turnaround.

The Leeds-based firm made an operating profit of £300,000 in the six months to September 30, an improvement on last year’s interim £2.5m loss.

Paul Hamer, WYG’s chief executive, said: “We’re in pretty good shape.

“The analysts have high expectations if we deliver £1.5m in operating profit this year. They’re looking at £4m next year.”

The group is 18 months in to a three-year restructuring programme.

“We’re halfway through,” said Mr Hamer. “We’re out and about talking to new shareholders. We’ve got a positive view. It shows our level of confidence that we’re talking to companies about acquisitions.”

Any purchases will be niche acquisitions that are technically excellent or regionally strong in a country WYG is keen to target.

The group has net cash of £16m and said it could also tap in to the debt market to fund deals.

WYG reported challenging conditions in the UK, but said it has secured good quality new business across its key sectors.

It said it is also developing a strong pipeline of international opportunities in both the public and private sectors.

Trading in the first half, and the first two months of the second half, was in line with the group’s own expectations and market forecasts for the full year.

Gross revenue fell from £68.5m to £61.8m while UK revenue fell from £35.1m to £32.0m, largely due to the declining business in the Republic of Ireland prior to its closure earlier this year.

Revenue was also down following the restructuring of the transport business.

Excluding these factors, the continuing UK business reported modest growth.

Revenue was flat or slightly down in each of the group’s key overseas markets although margins improved thanks to reduced reliance on traditional EU funded work.

Instead WYG is targeting private sector work.

On a statutory basis, the group made a pre-tax loss of £700,000.

Staff numbers fell from 1,325 to 1,282 following the closure of the business in the Republic of Ireland. The wholesale restructuring is now over so further job losses are unlikely.

While UK trading conditions are subdued, WYG is winning work in the defence and justice sector and energy and waste, where it has skills in specialist areas such as nuclear decommissioning.

The group recently won a major framework to provide strategic maintenance to Sellafield’s Decommissioning Directorate.

In transport, the group is working on the widening of the A453 around Nottingham but said the rest of the transport market is flat.

It said the defence sector is attractive with more opportunities emerging for the second half of the year.

The group is working on a number of major projects in Afghanistan where activity is ramping up.

It recently won a significant two-year contract with the MoD to help run Camp Bastion, the main military base in Afghanistan.

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.

WYG said the education and health sectors are strong.

In planning, the retail sector is steady, but public sector work continues to be constrained by limited client funds.

Analyst Michael Parkinson, at N+1 Singer, said: “Interim results are very slightly ahead of forecast. The key feature of the results is the return to profitability at the underlying operating profit level.

“With the bulk of the profit growth in our forecasts accounted for by already identified cost saving measures we are confident that WYG will achieve or possibly exceed our full-year estimates.

“We are attracted by the self help potential at WYG and the group’s strong and highly incentivised management team.”