WYG — Update 24 June 2016

WYG — Update 24 June 2016

WYG

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WYG

Momentum across all three reporting regions

FY16 results

Industrial support services

24 June 2016

Price

134.1p

Market cap

£93m

€1.27/£

Net cash* (£m) at end March 2016
*Inc £8.2m gross cash; £1.1m restricted.

0.2

Shares in issue

68.4m

Free float

86%

Code

WYG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.3

0.0

20.5

Rel (local)

3.3

(2.2)

29.0

52-week high/low

142.5p

111.0p

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

AGM

September 2016 – date tbc

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

WYG hit our FY16 expectations and ended the year strongly. All three regions are now profitable and have positive trading momentum and order books coming into FY17. We have maintained our recently raised EPS estimates with a 13% CAGR now to FY19. We see upside bias if the company successfully converts a good level of pipeline opportunities.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

130.5

5.7

8.6

1.0

15.6

0.7

03/16

133.5

7.0

10.6

1.5

13.7

1.1

03/17e

156.5

9.7

12.1

1.7

11.1

1.2

03/18e

170.6

11.0

13.6

1.9

9.8

1.4

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

FY16 results in line: UK strong, overseas profitable

FY16 results matched our expectations with a c 34% increase in EBIT on a modestly higher revenue base. Finance costs were slightly better than anticipated and together with a small tax credit (we had assumed no charge), PBT and EPS came in slightly ahead, with DPS in line at 1.5p (up 50%). As trailed in our May update note, UK operations performed well throughout the year, finished with strong momentum and delivered a 10.7% EBIT margin (+150bp y-o-y); acquisitions contributed c £3m revenue and £1.1m EBIT (or around half of the margin uplift). After a slower start to the year the EAA and MENA regions gathered revenue momentum in H2 as EU funded project activity built back up and both moved into profit in H2 and for the full year. At group level, higher year end activity levels had an associated working capital build up, which together with acquisition cash outflow left WYG in a £0.2m net cash position at year end (versus £12.3m a year earlier).

Positive order book and pipeline prospects

At the end of FY16, we raised FY17 and FY18 estimates to reflect momentum in all three reporting regions which is set to continue. The Brexit result is not expected to significantly alter prospects. A record c £150m order book and an encouraging, visible pipeline – especially overseas – support confidence in further expected progress. For now, we have made no further EBIT estimate changes (but finance costs are slightly lower) and introduced FY19 estimates. Good conversion rates of international prospects into orders – especially relating to the causes and consequences of mass migration flows through Africa and Eastern Europe where there is funding urgency – could drive higher expectations later in the year.

Valuation: Multiples reduced by improving prospects

In the last six months, WYG’s share price has traded in the 125-140p range and is modestly down overall ytd. During this time, our FY17 and FY18 EPS estimates have risen by c 15% and 12%, respectively, through a combination of organic upgrades and the acquisition of Signet in January. As a result, WYG’s P/E rating is now 11.1x and 9.8x for this year and next – with a three-year PEG just above 1x – and corresponding EV/EBITDA multiples of 7.8x and 6.7x, respectively.

Financial summary

Exhibit 1: Financial summary

£m

2013

2014

2015

2016

2017e

2018e

2019e

Year end 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

156.5

170.6

178.5

EBITDA

 

 

3.3

6.4

7.2

9.0

12.0

13.4

14.2

Operating Profit (before GW and except.)

1.5

4.8

5.4

7.2

10.0

11.3

12.0

Net Interest

 

 

(0.8)

(0.6)

(0.1)

(0.2)

(0.3)

(0.3)

(0.3)

JV / Associates

 

 

0.0

0.0

0.4

0.0

0.0

0.0

0.0

Intangible Amortisation

 

 

(1.0)

(1.2)

(1.3)

(1.5)

(1.7)

(1.7)

(1.7)

Other

 

 

(2.5)

(3.7)

(2.9)

(1.5)

(1.5)

(1.5)

(1.5)

Exceptionals

 

 

(0.6)

2.4

0.0

(1.8)

0.0

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

6.5

7.8

8.5

Tax

 

 

(0.1)

0.3

0.5

0.6

(0.8)

(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

8.9

10.1

10.7

Profit After Tax (FRS 3)

 

 

(3.4)

2.1

1.9

2.8

5.7

6.9

7.5

 

 

 

 

 

 

 

 

 

 

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

12.1

13.6

14.4

EPS - FRS 3 (p)

 

 

(5.2)

3.2

2.9

4.0

8.4

10.1

10.9

Dividend per share (p)

 

 

0.0

0.5

1.0

1.5

1.7

1.9

2.0

 

 

 

 

 

 

 

 

 

 

EBITDA Margin (%)

 

 

2.6

5.1

5.5

6.8

7.7

7.9

8.0

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

1.2

3.8

4.1

5.4

6.4

6.6

6.7

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

18.6

19.8

22.0

32.3

34.5

34.1

32.5

Intangible Assets

 

 

16.3

17.6

18.7

27.5

28.7

27.4

25.7

Tangible Assets

 

 

2.4

2.2

2.3

3.2

4.2

5.0

5.2

Investments

 

 

0.0

0.0

0.9

1.6

1.6

1.6

1.6

Current Assets

 

 

66.8

60.0

54.6

62.5

62.4

69.0

78.0

Stocks

 

 

20.2

21.6

21.1

30.4

31.4

31.6

32.9

Debtors

 

 

23.0

18.5

18.5

21.1

21.7

23.6

24.7

Cash

 

 

19.597

15.9

12.3

8.2

6.5

10.9

17.6

Current Liabilities

 

 

(45.7)

(42.9)

(40.8)

(50.7)

(50.9)

(53.5)

(55.7)

Creditors

 

 

(44.8)

(42.3)

(40.8)

(47.6)

(50.9)

(53.5)

(55.7)

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)

(13.0)

(10.8)

(9.9)

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)

(8.0)

(5.8)

(4.9)

Net Assets

 

 

16.4

20.1

22.5

28.3

33.0

38.7

44.9

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

(2.6)

(0.1)

2.4

(1.0)

9.2

10.1

11.5

Net Interest

 

 

(0.8)

(0.5)

(0.1)

(0.2)

(0.3)

(0.3)

(0.3)

Tax

 

 

(0.2)

(0.0)

(0.3)

(0.3)

(0.9)

(0.8)

(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)

(2.7)

(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)

(1.1)

(1.3)

Net Cash Flow

 

 

(5.6)

(3.3)

(2.0)

(12.6)

1.3

4.5

6.7

Opening net debt/(cash)

 

 

(23.0)

(18.6)

(15.2)

(12.3)

(0.2)

(1.5)

(5.9)

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

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(18.6)

(15.2)

(12.3)

(0.2)

(1.5)

(5.9)

(12.6)

Source: WYG accounts, Edison Investment Research

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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

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Level 25, Aurora Place

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Cerulean Pharma — Update 24 June 2016

Cerulean Pharma

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