Interim Results

25th Feb 2009 07:00



For Immediate Release

25 February 2009

WHITE YOUNG GREEN PLC

Interim results for the six months ended 31 December 2008

White Young Green Plc, consultant to the built, natural and social environment, announces its interim results for the six months ended 31 December 2008.

Highlights:

8% increase in revenue to £144.5m (2007: £134.1m)

No change in adjusted profit before tax to £9.0m (2007: £9.0m)*

2% decrease in adjusted earnings per share to 12.8p (2007: 13.1p)*

Dividend passed to preserve cash

6% decrease in net order book to £364m (2007: £390m)

Exceptional charge of £8m in respect of a provision against work in progress and debtor balances

Headcount reduced in first half by 235

Net debt increased to £91.5m (2007: £70.6m)

Operational review and cost reduction initiatives underway

Statutory disclosures:

Operating profit of £0.9m (2007:£9.7m)

Loss before tax of £2.1m (2007: profit of £7.1m)

Loss per share of (3.8p) (2007: earnings of 10.3p)

Commenting on the results, Chairman Peter Wood said:

"The Board has reviewed the Group's operations and has taken a number of decisions to tackle the issues given the current economic climate. These include a review of the Group work in progress and debtor position and swift and substantial cost reduction initiatives involving a reduction in headcount and a streamlining of the business. This cost reduction process has continued into the second half year. These steps are designed to ensure that the Company emerges from the current economic downturn fit for purpose with a clear strategy for future growth."

* adjusted business performance excludes the amortisation of acquired intangibles and exceptional costs in respect of work in progress and debtor provisions, employee termination costs and prospective offer costs.

For further information, please contact:

Peter Wood, Chairman

Paul Hamer, Group Managing Director

David Wilton, Group Finance Director

WHITE YOUNG GREEN PLC Tel: (0113) 278 7111

Tim Anderson / Rebecca Skye Dietrich

BUCHANAN COMMUNICATIONS Tel: (020) 7466 5000

CHAIRMAN'S STATEMENT

INTRODUCTION

The six month period to December 2008 has seen trading conditions become increasingly challenging for WYG, particularly in Ireland but also in the property development sector of the UK economy. Against this background the Board has reviewed the Group's operations and has taken a number of decisions to tackle the issues. These include a review of the Group work in progress and debtor position and swift and substantial cost reduction initiatives involving a reduction in headcount and a streamlining of the business. This cost reduction process has continued into the second half year. These steps are designed to ensure that the Company emerges from the current economic downturn fit for purpose with a clear strategy for future growth.

As part of its review of the Group's operations, the Board has implemented measures to reduce headcount in the first half by 235, which has resulted in annualised cost savings of c£5.7m after redundancy costs of £1.6m, with additional non-payroll savings of £2.4m also being made. The increased focus on the International business after a slowdown in the second half of the last financial year has resulted in a record order book of €97m at December 2008 and WYG has continued to win business in a number of its key markets and sectors.

RESULTS

In the six months to December 2008, gross revenue grew by 8% to £144.5m (2007: £134.1m). Net revenue attributable to in-house services increased by 13% to £123.4m (2007: £108.9m). Excluding the contribution from acquisitions made in the half year to December 2007, organic growth in net revenue was 6% (2007: 21%).

Operating profit before other items which include amortisation of acquired intangibles and exceptional items increased by 3% to £12.1m (2007: £11.7m). Operating profit margin on net revenue fell slightly to 9.8% (2007: 10.7%). Profit before tax and other items remained static at £9.0m (2007: £9.0m). On a statutory basis the Group made a loss before tax of £2.1m (2007: profit of £7.1m) reflecting the impact of other items in the period.

Earnings per share adjusted to exclude other items fell by 2% to 12.8p (2007: 13.1p). Although profit after tax before other items at £6.7m (2007: £6.6m) was slightly ahead of last year the average number of shares in issue increased by 3% to 51.8m (2007: 50.3m) following the issue of shares in consideration for acquisitions in 2007.

Cash generated from operations was £3.2m (2007: £7.5m). During this period credit markets have become tighter and clients have found it increasingly difficult to finance their projects. Therefore, in light of the current market conditions the Board has undertaken a review of all outstanding work in progress and debtor balances resulting in an exceptional provision of £8m and has put in place specific initiatives regarding the future management of working capital across the Group. Following this provision, working capital days in the UK and Ireland reduced to 100 days (2007: 109 days).

Net debt at 31 December 2008 increased to £91.5m (2007: £70.6m). As highlighted in the Group's November 2008 Interim Management Statement, part of this increase arose because of the additional consideration payments of £3.6m in respect of prior year acquisitions, and normal seasonal factors. However, the position was exacerbated by the rapid devaluation of Sterling in the final weeks of December 2008. At the €/£ exchange rate prevailing at 30 June 2008 of €1.26/£1, closing net debt at 31 December 2008 would have been some £10.7m less at £80.8m. Going forward the Group will review taking appropriate steps to convert a proportion of its Euro debt into Sterling and continue the focus on reducing working capital and generating cash. Despite this adverse exchange rate impact, as at 31 December 2008 the Group remained in full compliance with its banking covenants.

Since the interim period end, the Sterling/Euro exchange rate has eased to the benefit of the Group's debt position. In addition, the Group has continued to focus on vigorous working capital management and cash generation. However, as a result of the increasingly challenging market conditions, whilst the Group has headroom in its committed banking facilities, there is a risk that the Group may breach one of its covenants under its existing banking facilities later this year. The Group's lenders have been informed of these circumstances and discussions with them regarding a remedy of a potential breach have commenced. The Group recognises that, even before this point, the level of debt within the Group has been a key concern for investors. In this regard, the Group will explore a range of solutions with its lenders and shareholders to provide the business with a suitable financing structure for the current environment and allow all shareholders and customers to have full confidence in the Group going forward.

DIVIDEND

Given the focus on the need to generate and preserve cash in the current economic climate it has been decided not to pay a dividend for the financial year to June 2009, resulting in a cash saving of £4.9m compared to the prior year. As regards future dividend policy the Board intends to target a position where any dividend is covered at least three times by underlying earnings per share.

OTHER ITEMS

In order to provide a more meaningful analysis of underlying profits, business performance measures exclude the amortisation of intangible assets of £1.3m and the exceptional items in respect of the work in progress and debtor provisions of £8m, employee termination costs of £1.6m and the costs of £0.3m incurred relevant to the prospective offer for the business.

REVIEW OF OPERATIONS

WYG has reorganised its operations into five business segments, Engineering, Management Services, Environment Planning Transport, Ireland and International and will report its results in this format going forward. The business has seen mixed trading in the first six months of the year with Engineering, Ireland and International facing a number of different issues. In Engineering the underlying demand from its traditional private sector customer base has fallen, in International a short-term slowdown of throughput in Poland has led to a downturn in performance whilst in Ireland the main issue was the decline in the overall performance of the economy.

Engineering

Engineering gross revenues grew in the period by 2% to £44.5m (2007: £43.5m). Operating profit before other items decreased in the period by 8% to £2.1m (2007: £2.3m). Operating margin on net revenue fell to 5% (2007: 6%).

The result in Engineering has been achieved in spite of a significant downturn in the UK economy. Activity has been particularly poor in commercial property, housing and general private sector property development. To offset this, demand from the public sector in the UK has continued to be strong and the business continues to win significant projects in healthcare and education. Examples include Northumbria Hospital where WYG has been retained to provide engineering services for this new build hospital and the government's 'Building Schools for the Future' programme in the North West and North East. Transport and Infrastructure is also a key area for Engineering with a number of appointments being secured in the period from Network Rail including improvements to the infrastructure in the stations at Edinburgh and Glasgow and in Highways a further extension to the A453 widening project between M1 Junction 24 and Nottingham.

Staff numbers have been reduced and further reductions in staff numbers and the number of satellite offices are expected in the second half of the year.

Management Services

Gross revenues from Management Services grew in the period by 1% to £16.1m (2007: £15.9m) all of which was organic. Operating profit before other items also grew slightly in the period by 6% to £2.1m (2007: £2.0m). Operating margin on net revenue increased to 15% (2007: 14%).

In the UK demand in the private commercial development sector has reduced but this has been more than offset by an excellent public sector performance in areas such as defence, law and order, education and social housing.

Environment, Planning and Transport ("EPT")

Gross revenues increased in the period by 13% to £29.2m (2007: £25.7m) of which 9% was achieved organically. Operating profit before other items increased by 24% to £4.0m (2007: £3.2m) and operating margin on net revenue was held at 15% (2007: 15%).

EPT performed strongly in the first half of the year reflecting the strength of its client relationships and the long term nature of many of its assignments. Many clients engaged in seeking planning permission using the planning and environmental skills of the business have continued to progress their applications in an effort to underpin land values. Environmental sectors such as asbestos, ecology, acoustics and waste continue to generate strong demand. In Planning demand continues from private sector clients such as Sainsbury and National Grid and from the public sector from local councils and the Department for Communities and Local Government whilst in Transport Planning the business is using its excellent reputation to facilitate expansion into the public sector and international markets.

Ireland

Gross revenues in Ireland increased by 32% to £29.9m (2007 : £22.7m), all of which was due to the acquisition of P H McCarthy in October 2007. Operating profit before other items also increased by 32% to £3.7m (2007 : £2.8m).

The underlying market in the Irish economy has deteriorated significantly in the six month period resulting in difficult trading conditions with pressure on both margins and fee earning opportunities. This deterioration is not yet fully reflected in the half year results which have been improved by the inclusion of a full six months results of the P H McCarthy business, acquired in October 2007.

Further reductions in staff numbers and a rationalisation of regional offices are expected to be made in the second half of the year as the business adjusts to the reduced level of demand across the economy.

International

Gross revenues in International fell in the period by 6% to £24.8m (2007 : £26.2m) and operating profit before other items fell to £0.2m (2007 : £1.4m). The slowdown in throughput of work experienced by the International business in the second half of the last financial year continued to adversely impact performance into the first quarter. This was particularly relevant in relation to the business in Poland. However, since that time the order book has increased to €97m at December 2008 with significant project wins secured across a number of the countries in which the business operates including social integration in Turkey €8.1m, World Trade Organisation commission in Ukraine €5m, S7 road design in Poland €1.4m and public administration reform in Romania €2m. The outlook for the second half of the financial year is therefore much more positive, underpinned by a strong and visible order book.

EMPLOYEES

Total Group headcount has reduced by 235 between 1 July and 31 December 2008. It is expected to continue to reduce in the half year to 30 June 2009 as the necessary measures are taken to respond to current market conditions, primarily impacting the Engineering and Ireland business groups. Throughout this challenging period for the business and its people, the commitment and enthusiasm of all staff has been evident, and I take this opportunity to thank them on behalf of the Board for their continued support.

BOARD OF DIRECTORS

In the past six months Denis Connery, Commercial Director and Lawrie Haynes, Chief Executive, have left the business. We wish them well in the future.

David Wilton has joined the Board as Finance Director and Bob Hartley has moved to be Services Director whilst retaining the role of Company Secretary. Paul Hamer, formerly Chief Operating Officer, has been promoted to Group Managing Director. I look forward to working with the rest of the Board in the coming months to steer the business through these challenging times and to emerge fit for purpose with a clear strategy for future growth.

OUTLOOK

Since the period end, trading conditions have been mixed across the business and are expected to be more challenging than those experienced in the first half of the financial year. Priority is therefore focused on right sizing the business against the changing market place and also, of course, the generation of cash. In addition it is intended to concentrate on those areas of the business which enjoy a strong market position including defence, education, healthcare and infrastructure in both the domestic and international markets. The Board has a clear view as to what is needed and believes that its revised strategy will enable the business to tackle the issues in a determined, professional and timely fashion to ensure that WYG is well placed to take advantage of any future market upturn.

Unaudited consolidated income statement

For the six months ended 31 December 2008

		Six months ended 31 December 2008				Six months ended 31 December 2007
									Year ended
									30 June
		Before	Other items *		Before		Other items *		2008
		other items*	(note 5)	Total	other items*		(note 5)	Total	Total
	Note	£’000	£’000	£’000	£’000		£’000	£’000	£’000
Continuing operations
Revenue	4	144,451	—	144,451	134,068		—	134,068	282,108
Operating expenses		(132,383)	(11,135)	(143,518)	(122,389)		(1,937)	(124,326)	(259,906)
Operating profit	4	12,068	(11,135)	933	11,679		(1,937)	9,742	22,202
Finance costs		(3,027)	—	(3,027)	(2,652)		—	(2,652)	(5,354)
Profit/(loss) before tax		9,041	(11,135)	(2,094)	9,027		(1,937)	7,090	16,848
Tax	6	(2,386)	2,526	140	(2,456)		542	(1,914)	(2,411)
Profit/(loss) attributable to equity shareholders		6,655	(8,609)	(1,954)	6,571		(1,395)	5,176	14,437
Earnings per share	7
Basic		12.8p	(16.6p)	(3.8p)	13.1p		(2.8p)	10.3p	28.4p
Diluted		12.8p	(16.6p)	(3.8p)	12.6p		(2.7p)	9.9p	27.3p
Dividend per share
Interim – proposed		—	—	—	3.2p		—	3.2p	3.2p
Final – proposed		—	—	—	—		—	—	6.3p
		—	—	—	3.2p		—	3.2p	9.5p
Paid		6.3p	—	6.3p	5.4p		—	5.4p	8.6p

Dividends recognised in the period amounted to £3.3m (six months ended 31 December 2007: £2.7m, year ended 30 June 2008: £4.4m). The interim dividend proposed but not recognised in these interim financial statements amounted to £Nil (six months ended 31 December 2007: £1.7m).

* "Other items" relate to the amortisation of acquired intangibles and exceptional costs in respect of work in progress and trade receivables provisions, employee termination costs and prospective offer costs.

Unaudited consolidated balance sheet

As at 31 December 2008

	As at	As at	As at
	31 December	31 December	30 June
	2008	2007	2008
	£’000	£’000	£’000
Non-current assets
Goodwill	123,206	109,412	115,625
Other intangible assets	14,209	17,047	15,203
Property, plant and equipment	16,788	13,373	14,517
Deferred tax assets	1,209	2,886	1,933
Derivative financial instruments	45	183	506
	155,457	142,901	147,784
Current assets
Work in progress	50,478	42,112	48,041
Trade and other receivables	81,230	83,925	81,621
Tax recoverable	2,910	1,135	2,260
Cash and cash equivalents	11,230	11,488	17,427
	145,848	138,660	149,349
Current liabilities
Trade and other payables	(80,299)	(82,934)	(83,657)
Current tax liabilities	(186)	(3,255)	(1,490)
Financial liabilities	(5,423)	(2,210)	(1,756)
	(85,908)	(88,399)	(86,903)
Net current assets	59,940	50,261	62,446
Non-current liabilities
Financial liabilities	(97,330)	(79,854)	(83,874)
Retirement benefit obligation	(1,679)	(2,953)	(1,843)
Deferred tax liabilities	(3,796)	(4,608)	(4,127)
	(102,805)	(87,415)	(89,844)
Net assets	112,592	105,747	120,386
Shareholders’ equity
Share capital	2,598	2,583	2,583
Share premium account	22,204	21,607	21,614
Merger reserve	51,599	51,599	51,599
Hedging and translation reserve	4,100	(1,786)	5,616
Retained earnings	32,091	31,744	38,974
Total shareholders’ equity	112,592	105,747	120,386

 

 

Unaudited consolidated cash flow statement

For the six months ended 31 December 2008

		Six months	Six months	Year
		ended	ended	ended
		31 December	31 December	30 June
		2008	2007	2008
	Note	£’000	£’000	£’000
Operating activities
Cash generated from operations	8	3,200	7,512	30,998
Interest paid		(2,345)	(1,874)	(5,304)
Tax paid		(1,027)	(2,485)	(4,833)
Net cash (used in)/generated from operating activities		(172)	3,153	20,861
Investing activities
Proceeds on disposal of property, plant and equipment		480	149	4,247
Purchases of property, plant and equipment		(3,903)	(1,981)	(6,476)
Purchases of businesses		(3,600)	(22,073)	(29,538)
Purchases of intangible assets (computer software)		(565)	(734)	(1,409)
Cash balances acquired with businesses		—	1,611	1,643
Net cash used in investing activities		(7,588)	(23,028)	(31,533)
Financing activities
Net proceeds on issue of ordinary share capital		605	185	192
Equity dividends paid		(3,251)	(2,713)	(4,364)
Repayment of borrowings		(240)	(323)	(1,242)
Draw down of loan facilities		2,034	27,433	31,665
Repayments of obligations under finance leases		(1,054)	(1,201)	(6,519)
Purchase of own shares for Employee Benefit Trust		(605)	(622)	(622)
Net cash (used in)/generated from financing activities		(2,511)	22,759	19,110
Net (decrease)/increase in cash and cash equivalents		(10,271)	2,884	8,438
Cash and cash equivalents at beginning of period		17,042	8,604	8,604
Cash and cash equivalents at end of period		6,771	11,488	17,042

 

Unaudited analysis of changes in net financial liabilities:

for the six months ended 31 December 2008

 

		At		Other	At
		1 July	Cash	non cash	31 December
		2008	flows	items	2008
		£’000	£’000	£’000	£’000
Cash and cash equivalents		17,427	(8,520)	2,323	11,230
Bank overdrafts		(385)	(4,074)	—	(4,459)
Bank loans due after one year		(82,592)	(2,034)	(11,850)	(96,476)
Loan notes due within one year		(240)	240	—	—
Finance leases and hire purchase contracts		(2,413)	1,054	(459)	(1,818)
Total		(68,203)	(13,334)	(9,986)	(91,523)

 

 

 

Unaudited consolidated statement of recognised income and expense

For the six months ended 31 December 2008

	Six months	Six months	Year
	ended	ended	ended
	31 December	31 December	30 June
	2008	2007	2008
	£’000	£’000	£’000
(Loss)/profit attributable to equity shareholders	(1,954)	5,176	14,437
Net exchange adjustments offset in reserves net of tax	(1,055)	(977)	6,102
Actuarial gains on defined benefit pension schemes	—	—	584
(Losses)/gains on cash flow hedges	(461)	(122)	201
Tax on items taken directly to equity	(192)	55	(525)
Total recognised income and expense for the period	(3,662)	4,132	20,799

 

Unaudited consolidated statement of changes in shareholders' equity

For the six months ended 31 December 2008

 

	Six months	Six months	Year
	ended	ended	ended
	31 December	31 December	30 June
	2008	2007	2008
	£’000	£’000	£’000
(Loss)/profit attributable to equity shareholders	(1,954)	5,176	14,437
Net exchange adjustments offset in reserves net of tax	(1,055)	(977)	6,102
Actuarial gains on defined benefit pension schemes	—	—	584
(Losses)/gains on cash flow hedges	(461)	(122)	201
Share-based payments	(1,486)	142	(242)
New share capital issued, net of expenses	605	15,257	15,264
Tax on items taken directly to equity	(192)	55	(525)
Equity dividends paid	(3,251)	(2,713)	(4,364)
Net (reduction in)/addition to shareholders’ equity	(7,794)	16,818	31,457
Equity attributable to equity shareholders of the Company at beginning of the period	120,386	88,929	88,929
Equity attributable to equity shareholders of the Company at end of the period	112,592	105,747	120,386

 

Notes to the unaudited interim results

For the six months ended 31 December 2008

1. Company details

WYG is an international business providing consultancy services to the built, natural and social environment.

2. General information

The Interim Financial Report is unaudited. The financial information does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information relating to the year ended 30 June 2008 is an extract from the latest published accounts which have been delivered to the Registrar of Companies; the report of the auditors on these accounts was unqualified.

3. Accounting policies

The Interim Financial Report has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The same accounting policies and methods of computation are followed in the interim financial statements as the latest published audited accounts, which are available on the Company's website at www.wyg.com with the exception of IFRS8 "Operating Segments" where the Group has chosen to early adopt the provisions of IFRS8. IFRS8 replaces IAS14 "Segment Reporting" and requires a 'Management Approach' under which segment information is presented on the same basis as that used for internal reporting purposes. The Interim Financial Report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 (Interim Financial Reporting) as adopted by the European Union.

4. Segmental information

For management purposes, the Group is currently organised into five operating business segments - Engineering, Management Services, Environment Planning Transport, Ireland and International. These business segments are the basis on which the Group reports its segment information.

The segment results for the six months ended 31 December 2008 are as follows:

	Engineering	Management	Environment	Ireland	International	Group
		Services	Planning
			Transport
	£’000	£’000	£’000	£’000	£’000	£’000
Revenue
External sales	44,772	16,143	29,232	30,593	24,751	145,491
Inter-segment sales	(245)	(58)	(14)	(723)	—	(1,040)
Total revenue	44,527	16,085	29,218	29,870	24,751	144,451
Result
Operating profit before other items	2,081	2,080	3,999	3,698	210	12,068
Other items (Note 5)	(2,717)	(757)	(1,021)	(5,131)	(1,509)	(11,135)
Operating (loss)/profit	(636)	1,323	2,978	(1,433)	(1,299)	933
Finance costs						(3,027)
Loss before tax						(2,094)
Tax						140
Loss attributable to equity shareholders						(1,954)

 

4. Segmental information continued

The segment results for the six months ended 31 December 2007 are as follows:

	Engineering	Management	Environment	Ireland	International	Group
		Services	Planning
			Transport
	£’000	£’000	£’000	£’000	£’000	£’000
Revenue
External sales	45,545	16,382	26,116	23,473	26,227	137,743
Inter-segment sales	(2,060)	(451)	(369)	(795)	—	(3,675)
Total revenue	43,485	15,931	25,747	22,678	26,227	134,068
Result
Operating profit before other items	2,271	1,966	3,236	2,800	1,406	11,679
Other items (Note 5)	(394)	(239)	(589)	(657)	(58)	(1,937)
Operating profit	1,877	1,727	2,647	2,143	1,348	9,742
Finance costs						(2,652)
Profit before tax						7,090
Tax						(1,914)
Profit attributable to equity shareholders						5,176

 

5. Other items

		Six months	Six months
		ended	ended
		31 December	31 December
		2008	2007
		£’000	£’000
Amortisation of acquired intangibles		1,301	1,937
Exceptional costs
- Work in progress and trade receivables provisions		8,000	—
- Employee termination costs		1,566	—
- Prospective offer costs		268	—
Total other items		11,135	1,937

 

6. Tax

The tax charge before other items for the six months ended 31 December 2008 has been calculated at 26%, the estimated effective tax rate for the year ended 30 June 2009.

7. Earnings per share

Adjusted earnings per share is calculated after adding back acquired intangible asset amortisation and exceptional costs in respect of work in progress and trade receivables provisions, employee termination costs and prospective offer costs after tax of £8.61m (2007: £1.40m), giving adjusted earnings of £6.66m (2007: £6.57m) which are divided by the average number of shares in issue during the period ranking for dividend of 51,800,522 (2007: 50,302,601).

Earnings per share is calculated on the loss after tax of £1.95m (2007: profit after tax of £5.18m) and the average number of shares in issue disclosed above.

Diluted earnings per share is calculated by taking the earnings as disclosed above and the average number of shares that would be issued on the full exercise of outstanding share options and the issue of shares in respect of deferred consideration of 51,813,462 (2007: 52,328,566).

8. Cash generated from operations

			Six months	Six months	Year
			ended	ended	ended
			31 December	31 December	30 June
			2008	2007	2008
			£’000	£’000	£’000
Profit from operations			933	9,742	22,202
Adjustments for:
	Depreciation of property, plant and equipment		2,084	2,137	4,652
	Amortisation of intangible assets		1,877	2,404	5,249
	Loss/(profit) on disposal of property, plant and equipment		18	(24)	(858)
	Share options (credit)/charge		(742)	856	1,214
Operating cash flows before movements in working capital			4,170	15,115	32,459
	Decrease/(increase) in inventories		2,489	(1,875)	(4,666)
	Decrease/(increase) in receivables		5,890	(11,383)	(5,648)
	(Decrease)/increase in payables		(9,349)	5,655	8,853
Cash generated from operations			3,200	7,512	30,998

 

9. Availability of interim report

The Interim Report will be posted to shareholders on Thursday 12 March 2009 and copies will be available at the Company's registered office at Arndale Court, Headingley, Leeds LS6 2UJ, or on the Company's website www.wyg.com.

ENDIR CKQKKDBKBFBB

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Related Shares:

WYG