WYG — Update 31 January 2017

WYG — Update 31 January 2017

WYG

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Written by

WYG

New orders send positive signals

Contract wins

Industrial support services

31 January 2017

Price

130.50p

Market cap

£91m

£/€ 1.17

Net debt (£m) at end September 2016

4.9

Shares in issue

68.7m

Free float

86%

Code

WYG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.4

20.6

(2.3)

Rel (local)

2.6

18.2

(15.6)

52-week high/low

142.5p

97.0p

Business description

WYG is a multidiscipline, international project management and management service consultancy with over half of revenues generated in the UK and the remainder in a spread of international markets, reported as Europe, Africa and Asia (EAA) and Middle East, North Africa (MENA).

Next events

Ex-dividend H117 0.6p

9 March 2017

H117 dividend payable

3 April 2017

Analysts

Toby Thorrington

+44 (0)20 3077 5721

Roger Johnston

+44 (0)20 3077 5722

WYG is a research client of Edison Investment Research Limited

The latest contract win announcements continue the order momentum seen at the time of H117 results. The significance of new international workflow will serve to underpin our expectation of an improving overseas contribution and, at the same time, provide post-Brexit reassurance for investors. We expect this will translate to further share price progress.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

130.5

5.7

8.6

1.0

15.2

0.8

03/16

133.5

7.0

10.6

1.5

12.3

1.1

03/17e

155.0

9.7

13.2

1.8

9.9

1.4

03/18e

166.0

11.0

13.6

2.0

9.6

1.5

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

New orders, broad scope

In our post H117 results note, we commented positively on WYG’s reported order book development and its pipeline of prospects. Newly secured contracts with a total value to WYG of €17m have been announced. They relate to multiple countries (in Europe, Africa and South America) with financing from both EU and country-level funds to be spread over four years. The diversity of work is striking and includes technical support for the development of physical assets (eg utilities), governance/financial management and regional co-operation programmes. We note that the country scope now includes Brazil and Lebanon as well as Turkey and the Western Balkans (where WYG has a more established historic presence).

Improving international outlook

At the end of September, WYG’s total order book was c £164m; around £83m related to overseas operations including c £56m for delivery beyond the current year. In this context, €17m (c £14.5m) of new work is a meaningful addition, providing a strong underpin to existing estimates. We model FY17 international revenue of £46m, rising to c £63m by FY19 (EBIT moves from £1.3m to £1.8m on the same basis). So, forward visibility is improving and a simple annual average for the latest contract wins accounts for a good proportion of the uplift outlined. International performance has been patchy in the last couple of years – coinciding with EU funding transition – so progress can now enhance that in the UK. We will review group estimates fully in March based on year-end momentum.

Valuation: Share price progress to continue

Securing EU-funded international work has helped to reassure investors that the Brexit result is not affecting workflows; WYG’s share price has regained the levels seen in the first half of 2016, having rallied from its post-Brexit sell-off. Estimates have risen over the last 12 months and WYG’s FY17 P/E rating currently stands at 9.9x with an EV/EBITDA of 7.6x. With a flagged strategic update to come, WYG’s share price may benefit from further stimulus in the coming months.

Exhibit 1: Financial summary

£m

2013

2014

2015

2016

2017e

2018e

2019e

March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

IAS19R

IAS19R

IAS19R

IAS19R

IAS19R

IAS19R

IAS19R

Revenue

 

 

125.7

126.9

130.5

133.5

155.0

166.0

178.5

EBITDA

 

 

3.3

6.4

7.2

9.0

12.4

13.7

14.5

Operating Profit (before GW and except.)

1.5

4.8

5.4

7.2

10.1

11.3

12.0

Net Interest

 

 

(0.8)

(0.6)

(0.1)

(0.2)

(0.5)

(0.4)

(0.3)

JV / Associates

 

 

0.0

0.0

0.4

0.0

0.1

0.0

0.0

Intangible Amortisation

 

 

(1.0)

(1.2)

(1.3)

(1.5)

(2.0)

(2.0)

(2.0)

Other

 

 

(2.5)

(3.7)

(2.9)

(1.5)

(1.0)

(1.0)

(1.0)

Exceptionals

 

 

(0.6)

2.4

0.0

(1.8)

(1.0)

0.0

0.0

Profit Before Tax (norm)

 

 

0.7

4.3

5.7

7.0

9.7

11.0

11.7

Profit Before Tax (FRS 3)

 

 

(3.3)

1.8

1.4

2.2

5.7

8.0

8.7

Tax

 

 

(0.1)

0.3

0.5

0.6

0.0

(0.9)

(1.0)

Minorities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

 

 

0.7

4.5

6.2

7.6

9.7

10.1

10.7

Profit After Tax (FRS 3)

 

 

(3.4)

2.1

1.9

2.8

5.7

7.1

7.7

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

64.5

64.6

65.8

70.6

68.4

68.4

68.4

EPS - normalised fully diluted (p)

 

 

0.8

6.4

8.6

10.6

13.2

13.6

14.4

EPS - FRS 3 (p)

 

 

(5.2)

3.2

2.9

4.0

8.4

10.4

11.2

Dividend per share (p)

 

 

0.0

0.5

1.0

1.5

1.8

2.0

2.2

 

 

 

 

 

 

 

 

 

 

EBITDA Margin (%)

 

 

2.6

5.1

5.5

6.8

8.0

8.3

8.1

Operating Margin (before GW and except.) (%)

1.2

3.8

4.1

5.4

6.5

6.8

6.7

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

18.6

19.8

22.0

32.3

34.4

33.4

31.2

Intangible Assets

 

 

16.3

17.6

18.7

27.5

28.7

27.1

25.0

Tangible Assets

 

 

2.4

2.2

2.3

3.2

3.9

4.5

4.4

Investments

 

 

0.0

0.0

0.9

1.6

1.8

1.8

1.8

Current Assets

 

 

66.8

60.0

54.6

62.5

60.7

67.1

77.4

Stocks

 

 

20.2

21.6

21.1

30.4

31.7

31.4

32.9

Debtors

 

 

23.0

18.5

18.5

19.7

20.4

22.8

24.5

Cash

 

 

19.597

15.9

12.3

8.2

5.2

9.5

16.5

Current Liabilities

 

 

(45.7)

(42.9)

(40.8)

(50.7)

(48.9)

(50.7)

(52.6)

Creditors

 

 

(44.8)

(42.3)

(40.8)

(47.6)

(48.9)

(50.7)

(52.6)

Short term borrowings

 

 

(0.953)

(0.7)

0.0

(3.1)

0.0

0.0

0.0

Long Term Liabilities

 

 

(23.3)

(16.9)

(13.2)

(15.8)

(11.9)

(9.7)

(9.5)

Long term borrowings

 

 

0.0

0.0

0.0

(5.0)

(5.0)

(5.0)

(5.0)

Other long term liabilities

 

 

(23.3)

(16.9)

(13.2)

(10.8)

(6.9)

(4.7)

(4.5)

Net Assets

 

 

16.4

20.1

22.5

28.3

34.3

40.1

46.4

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

(2.6)

(0.1)

2.4

(1.0)

8.1

10.1

12.0

Net Interest

 

 

(0.8)

(0.5)

(0.1)

(0.2)

(0.5)

(0.4)

(0.3)

Tax

 

 

(0.2)

(0.0)

(0.3)

(0.3)

(0.9)

(0.9)

(0.9)

Capex

 

 

(1.3)

(1.4)

(1.7)

(2.5)

(2.9)

(2.9)

(2.4)

Acquisitions/disposals

 

 

(0.8)

(1.4)

(1.6)

(7.9)

(3.0)

(0.5)

0.0

Financing

 

 

(0.0)

0.0

(0.2)

0.0

0.0

0.0

0.0

Dividends

 

 

0.0

0.0

(0.5)

(0.8)

(1.1)

(1.3)

(1.4)

Net Cash Flow

 

 

(5.6)

(3.3)

(2.0)

(12.6)

(0.3)

4.2

7.0

Opening net debt/(cash)

 

 

(23.0)

(18.6)

(15.2)

(12.3)

(0.2)

(0.2)

(4.5)

HP finance leases initiated

 

 

(0.0)

0.0

0.0

0.0

0.0

0.0

0.0

Other

 

 

1.3

(0.2)

(0.9)

0.5

0.3

0.0

(0.0)

Closing net debt/(cash)

 

 

(18.6)

(15.2)

(12.3)

(0.2)

(0.2)

(4.5)

(11.5)

Source: WYG accounts, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by WYG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by WYG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Quarto Group Inc. (The) — Update 31 January 2017

Quarto Group Inc. (The)

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