13th Feb 2019 15:32
LONDON (Alliance News) - Shares in professional services company WYG PLC crashed Wednesday as it warned profit is set to miss market expectations, while it will also fail covenants.
The stock was down 51% on Wednesday afternoon at a price of 18.90 pence a share.
WYG's revenue for its year ending March 31 is set to be flat year-on-year, it said, with revenue and net debt to meet market expectations.
However, with International Development revenue now making up a bigger proportion of WYG's group revenue, it now expects second half operating profit lower than the first half.
This, WYG continued, implies annual operating profit will be "materially below" market expectations.
International Development's pipeline is converting into work, WYG said, meaning revenue should beat expectations. However, this business operates at lower margins than the UK-focused Consultancy Services unit.
"However, our UK markets are now being impacted by the current cautious business sentiment and political uncertainty, meaning Consultancy Services is seeing some delays in investment decisions regarding new work as well as the deferral of activity on certain existing projects, across both the public and private sectors," said WYG.
"As a result, we think it necessary to take a more cautious view as to the likely outturn for our UK business for the year such that we no longer expect to see the marked increase in our UK activity that has been typical of the final quarter of our financial year in the past."
As a result, WYG expects to fail to meet its debt to earnings or interest cover covenants, and will now talk with its lender to secure a deferral or waiver.
Chief Executive Douglas McCormick said: "While it is disappointing to be revising expectations today, subdued domestic economic conditions and the headwind from political uncertainty is affecting many businesses' willingness to commit to major new projects.
"This has particularly affected the construction sector which underpins much of our business in the UK."
"Our strategy of developing a simpler, more robust platform and driving efficiencies continues. I am confident the actions we are taking will improve the longer term prospects of the business and we will look to accelerate these actions to mitigate against the impact of an unusually difficult final quarter in the current uncertain macro-economic environment," he added.
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