WYG — Update 7 January 2016

WYG — Update 7 January 2016

WYG

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WYG

Another UK deal sealed

UK acquisition

Industrial support services

8 January 2016

Price

139.50p

Market cap

£93m

£/€1.37

Net cash (£m) at end September 2015
(includes £0.9m restricted)

3.4

Shares in issue

67.0m

Free float

86%

Code

WYG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.6

10.3

33.5

Rel (local)

13.1

16.2

40.3

52-week high/low

141.00p

100.00p

Business description

WYG is a multidiscipline, international project management and management service consultancy. Over half of its revenues are 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 H116 0.5p

25 February 2016

H116 dividend payable

16 March 2016

FY16 year end

March

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

Signet Planning is WYG’s third UK acquisition in FY16, adding to company momentum in good sector conditions. It enhances WYG’s regional planning consulting network and also strengthens its presence in other areas. On our estimates, the deal enhances FY17 and FY18 fully diluted EPS by over 8% in each year. On top of existing growth expectations, this brings WYG’s valuation multiples down rapidly over our estimate horizon.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/14

126.9

4.3

6.4

0.5

21.8

0.4

03/15

130.5

5.7

8.6

1.0

16.2

0.7

03/16e

134.7

6.9

8.8

1.5

15.9

1.1

03/17e

155.5

8.9

11.3

1.7

12.3

1.2

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.

Complementary and additive fit

Signet Planning is a front-end UK town planning and urban design consultancy based in Harrogate, with four other offices (in Newcastle, London, Nottingham and Manchester). It fits well with WYG’s existing regional footprint in these disciplines, especially on residential projects, strengthens the group’s position in the London Commercial segment and enhances scope to take on work related to the UK government Northern Powerhouse agenda (an area highlighted in the recent H1 results announcement). In the year to March 2015, Signet reported turnover and PBT of £3.7m and £0.7m respectively and is understood to be in an ongoing growth phase.

Reasonable multiples, earnings enhanced

WYG is paying an initial cash consideration of £3.5m, with a further potential £0.235m payable in a year’s time subject to the satisfactory development of existing work in progress and debtor collection. Consequently, acquisition multiples look to be in the order of 1x revenue and c 6x EBITDA. Reflecting this transaction, we have increased our estimates for FY17 and FY18 by over 8%. Over the last year, our FY17 group estimates have now risen by c 15% driven by a combination of organic growth in the UK – which has more than offset short-term softness in overseas order intake – and the three acquisitions here during the period. Hence, visible progress is being made towards management’s stated target of achieving £15m PBT in FY18.

Valuation: Strong growth expected

On revised estimates, the three-year fully diluted EPS CAGR to FY18 is almost 15% now and the trailing P/E of 16.2x reduces rapidly to 10.7x at the end of this period. At the same time, the corresponding EV/EBITDA multiples move from 12.9x down to 7.3x. While WYG’s share price has risen by almost 40% over the last 12 months, we feel the current rating is still reasonable. Good business momentum and management’s FY18 target both suggest a positive bias towards further upgrades in due course.

Exhibit 1: Financial summary

£'ms

2013

2014

2015

2016e

2017e

2018e

March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

IAS19R

IAS19R

IAS19R

IAS19R

IAS19R

IAS19R

Revenue

 

 

125.7

126.9

130.5

134.7

155.5

168.6

EBITDA

 

 

3.3

6.4

7.2

9.0

11.2

12.7

Operating Profit (before GW and except.)

1.5

4.8

5.4

7.2

9.4

10.9

Net Interest

 

 

(0.8)

(0.6)

(0.1)

(0.3)

(0.5)

(0.6)

JV / Associates

 

 

0.0

0.0

0.4

0.0

0.0

0.0

Intangible Amortisation

 

 

(1.0)

(1.2)

(1.3)

(1.5)

(1.5)

(1.5)

Other

 

 

(2.5)

(3.7)

(2.9)

(1.0)

(1.0)

(1.0)

Exceptionals

 

 

(0.6)

2.4

0.0

1.3

0.0

0.0

Profit Before Tax (norm)

 

 

0.7

4.3

5.7

6.9

8.9

10.3

Profit Before Tax (FRS 3)

 

 

(3.3)

1.8

1.4

5.7

6.4

7.8

Tax

 

 

(0.1)

0.3

0.5

(0.7)

(0.8)

(0.9)

Minorities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

 

 

0.7

4.5

6.2

6.3

8.1

9.4

Profit After Tax (FRS 3)

 

 

(3.4)

2.1

1.9

5.0

5.6

6.9

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

64.5

64.6

65.8

69.8

68.4

68.4

EPS - normalised fully diluted (p)

 

 

0.8

6.4

8.6

8.8

11.3

13.1

EPS - FRS 3 (p)

 

 

(5.2)

3.2

2.9

7.2

8.2

10.1

Dividend per share (p)

 

 

0.0

0.5

1.0

1.5

1.7

1.9

 

 

 

 

 

 

 

 

 

EBITDA Margin (%)

 

 

2.6

5.1

5.5

6.7

7.2

7.5

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

1.2

3.8

4.1

5.4

6.1

6.5

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

Fixed Assets

 

 

18.6

19.8

22.0

27.9

30.4

30.4

Intangible Assets

 

 

16.3

17.6

18.7

23.3

24.6

23.4

Tangible Assets

 

 

2.4

2.2

2.3

3.8

5.0

6.1

Investments

 

 

0.0

0.0

0.9

0.8

0.8

0.8

Current Assets

 

 

66.8

60.0

54.6

52.6

55.8

62.5

Stocks

 

 

20.2

21.6

21.1

21.0

24.3

26.3

Debtors

 

 

23.0

18.5

18.5

23.1

23.6

25.6

Cash

 

 

19.597

15.9

12.3

4.4

3.8

6.5

Current Liabilities

 

 

(45.7)

(42.9)

(40.8)

(42.6)

(46.9)

(50.4)

Creditors

 

 

(44.8)

(42.3)

(40.8)

(42.6)

(46.9)

(50.4)

Short term borrowings

 

 

(0.953)

(0.7)

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(23.3)

(16.9)

(13.2)

(10.0)

(6.9)

(4.4)

Long term borrowings

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

 

 

(23.3)

(16.9)

(13.2)

(10.0)

(6.9)

(4.4)

Net Assets

 

 

16.4

20.1

22.5

27.8

32.3

38.1

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

(2.6)

(0.1)

2.4

4.4

7.2

8.5

Net Interest

 

 

(0.8)

(0.5)

(0.1)

(0.3)

(0.5)

(0.6)

Tax

 

 

(0.2)

(0.0)

(0.3)

(1.0)

(0.7)

(0.8)

Capex

 

 

(1.3)

(1.4)

(1.7)

(1.8)

(2.8)

(2.8)

Acquisitions/disposals

 

 

(0.8)

(1.4)

(1.6)

(8.5)

(2.7)

(0.5)

Financing

 

 

(0.0)

0.0

(0.2)

0.0

(0.0)

0.0

Dividends

 

 

0.0

0.0

(0.5)

(0.8)

(1.1)

(1.1)

Net Cash Flow

 

 

(5.6)

(3.3)

(2.0)

(8.0)

(0.6)

2.7

Opening net debt/(cash)

 

 

(23.0)

(18.6)

(15.2)

(12.3)

(4.4)

(3.8)

HP finance leases initiated

 

 

(0.0)

0.0

0.0

0.0

0.0

0.0

Other

 

 

1.3

(0.2)

(0.9)

0.1

0.0

(0.0)

Closing net debt/(cash)

 

 

(18.6)

(15.2)

(12.3)

(4.4)

(3.8)

(6.5)

Source: Company accounts, Edison Investment Research

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United Kingdom

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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

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Euromax Resources — Update 6 January 2016

Euromax Resources

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