27th Sep 2005 07:00
White Young Green PLC27 September 2005 For Immediate Release 27 September 2005 WHITE YOUNG GREEN PLC Preliminary results for the year ended 30 June 2005 White Young Green Plc, consultant to the built, natural and social environment,announces its preliminary results for the year ended 30 June 2005. Highlights: - 60% increase in turnover to £143.9m (2004: £89.9m) - 46% increase in profit before tax and goodwill amortisation to £10.0m (2004: £6.9m) - 40% increase in profit before tax to £8.1m (2004: £5.8m) - 27% increase in adjusted earnings per share to 18.0p (2004: 14.2p) - 19% increase in earnings per share to 13.2p (2004: 11.1p) - 10% increase in dividend per share to 6.5p (2004: 5.9p) - 27% increase in net order book to a record of £253m - 86% of 2005 net turnover already secured for 2006 - Two acquisitions completed in second half of year - Eighth consecutive year of double digit organic growth Commenting on the results, Chairman Peter Wood said: "It gives me great pleasure to report a year of considerable success for WhiteYoung Green (WYG) with a range of key short term objectives having been achievedwhich, collectively, reflect the increased growth momentum and quality ofearnings now apparent throughout the business. WYG has started the new financial year with confidence and optimism havingdelivered yet another year of double digit organic growth, an order book atrecord levels and an operating margin on net turnover of 10%." For further information, please contact: WHITE YOUNG GREEN PLC Tel: 0113 278 7111John Purvis, Chief ExecutiveBob Hartley, Finance Director BUCHANAN COMMUNICATIONS Tel: 020 7466 5000Tim Anderson / Rebecca Skye Dietrich CHAIRMAN'S STATEMENT Introduction It gives me great pleasure to report a year of considerable success for WhiteYoung Green (WYG) with a range of key short term objectives having been achievedwhich, collectively, reflect the increased growth momentum and quality ofearnings now apparent throughout the business. Net turnover from in-houseservices has exceeded £100m, profit before tax and goodwill amortisation hasrisen above £10m and, for the first time, operating margin on net turnover hasreached 10.0% (2004: 9.6%). When those achievements are read in conjunctionwith an order book up 27% to £253m (2004: £200m), a demonstrably successfulacquisition strategy and a 12% rate of underlying organic turnover growth thenthe year to June 2005 has clearly been a landmark year for the Group. The acquisitions completed in the second half of the last financial year haveall performed strongly in their first full year under WYG ownership. They havealso contributed significantly to a 60% increase in turnover to £143.9m (2004:£89.9m) and a 53% increase in operating profit before goodwill amortisation to£11.6m (2004: £7.6m). IMC Consulting, now re-badged as WYG International, hasexperienced unprecedented levels of new business with long term net order bookup 63%, to £34.2m (2004: £21.0m). This includes notable recent successes infusing the traditional WYG engineering, environmental and planning skills withthe macro social and economic regeneration expertise already available withinthat business. Results Gross turnover grew by 60% in the year to £143.9m (2004: £89.9m) and included acontribution of £1.8m from acquisitions completed during the course of the year.The underlying growth in turnover from continuing operations was 12%. Turnoverattributable to third parties, on which the Group does not make a margin,increased to £27.6m (2004: £11.3m) as a consequence of the use of a wide rangeof specialist sub-consultants in the international arena. Turnover net ofpayments to third parties therefore grew by 48% in the year to £116.3m (2004:£78.6m). Operating profit before goodwill amortisation increased by 53% to £11.6m (2004:£7.6m) and included a contribution of £0.2m from acquisitions completed duringthe course of the year. Operating profit after goodwill amortisation increasedby 49% to £9.7m (2004: £6.5m). Operating margin, calculated as operating profit before goodwill amortisationdivided by turnover net of payments to third parties, improved further to 10.0%(2004: 9.6%) underlining WYG's position as one of the most efficient andprofitable professional consultancies in the support services sector. Earnings per share adjusted to exclude goodwill amortisation increased by 27% to18.0p (2004: 14.2p). Basic earnings per share in the year increased by 19% to13.2p (2004: 11.1p). The average number of shares in issue increased by 15%following the successful share placing and open offer in January 2004 and theissuing of shares in satisfaction of consideration due for acquisitions. The balance sheet remains strong and further improvements in working capitalmanagement have been achieved. Overall working capital days reduced in theperiod to 85 days (2004: 117 days) due, in part, to the advance payments enjoyedby WYG International. Excluding those advance payments, the underlying combinedwork in progress and debtor days also fell to 107 days (2004: 117 days) whilstgearing, defined as net debt divided by total net assets, reduced in the year to28% (2004: 29%). Net debt at the year end was £15.4m (2004: £14.2m) andinterest was covered 7.5 times (2004: 10.5 times) by operating profit beforegoodwill amortisation. Dividend It is proposed that the final dividend be increased by 11% to 4.1p per share(2004: 3.7p) making a total for the year of 6.5p (2004: 5.9p). The dividend iscovered 2.8 times (2004: 2.4 times) by adjusted earnings per share and 2.0 times(2004: 1.9 times) by basic earnings per share. The final dividend will be paidon 6 December 2005 to shareholders on the register at 7 October 2005. Acquisitions On 28 February 2005, WYG completed two acquisitions which strengthened theGroup's position in the strategically important waste management, town planningand urban regeneration markets. The acquisition of Robert Long Consultancy Limited, with offices in Southampton,Cambridge and Huddersfield, has added the complementary skills of wastemanagement engineering to WYG's portfolio of environmental services. This isparticularly important in the context of recent legislative changes in thisfield as well as the significant international opportunities likely to arise inthis sector in the future. The acquisition of WynThomasGordonLewis Limited, a town planning and urbanregeneration consultancy based in Cardiff, expands WYG's town planningcapability into the Welsh market. It also strengthens WYG's overall capabilityand capacity in the strategically important urban regeneration field. Both acquisitions have integrated well into WYG's existing operations and havemade a positive contribution to this year's results in line with expectations. WYG will continue to both stimulate organic growth and broaden the skills baseof the Group through further strategic acquisitions which are clearly earningsenhancing and offer real added value post-acquisition. Good opportunitiescontinue to arise and the current pipeline is very encouraging. Board of Directors The senior management team at WYG has continued to evolve and has beenstrengthened in the past year by the recruitment of a further non-executivedirector and the promotion from within WYG of an additional executive director. Brian Duckworth joined the Board as a non-executive director with effect from 1April 2005. Brian recently retired from the board of Severn Trent Plc on whichhe held the positions of Managing Director of Severn Trent Water and Chairman ofSevern Trent Water International. He is also currently a non-executive directorof Redrow Plc and Avon Rubber Plc. On 1 July 2005 Richard McCaffrey joined the Board as Chief Operating Officer.Richard has been with WYG since July 2000 and is now responsible for the day today management of WYG's operational business. He has over 25 years experience inthe water, environmental and engineering markets having successfully deliveredmajor projects and managed multi-skilled professional teams within both thepublic and private sectors of the economy. Gareth Cooper retired as Chairman of WYG, and from the Board, at the AnnualGeneral Meeting held on 10 November 2004, after eleven years continuous service,first as a non-executive director of Ernest Green Holdings Plc and subsequentlyas Chairman of WYG. I take this opportunity to add my thanks to Gareth for hiswise counsel and assistance since I joined the Board and also for his valuedservice to both companies over the past eleven years. We wish him a very happyand healthy retirement. Employees Since becoming Chairman in November 2004 I have been impressed by the qualityand commitment of staff in all areas of the business. WYG has grownsignificantly over the past twelve months whilst retaining the essential ethos,character and vision that has driven its corporate development over recentyears. This could not have been achieved without the belief, commitment andenthusiasm of all of its staff including those who are relatively new to thebusiness. I therefore take this opportunity to thank all members of staff fortheir exceptional support and professionalism. Review of Operations Operational highlights for the year to June 2005 include the following: • 27% increase in net order book to £253m (2004: £200m); • 48% of order book in long term framework contracts extending to 2012; • 56%/44% public/private turnover split in UK and Ireland; • 28% turnover growth in private sector business; • 22% turnover growth in public sector business; and • Turnover up across all key public and private sector markets. All of WYG's key skill groups of Engineering, Management Services, Environmentaland Town Planning have enjoyed a very successful year with record levels of newbusiness contributing to a 27% increase in committed long term order book. Thenet order book, exclusive of third parties, now stands at £253m (2004: £200m),or approximately two years net turnover. The strength of the order book isreflected in 86% of the net turnover achieved in 2005 already being in place for2006 along with 63% for the following year. In the international arena the platform has now been established toprogressively introduce WYG's traditional skills, initially to the wellestablished development aid funded market and subsequently to a much broader mixof secure and profitable business. Early successes in that regard on EU fundedprojects in Syria and Poland are particularly encouraging. During the course ofthe year the WYG International team, engaged in social and economicregeneration, has also significantly broadened its geographic sphere ofactivity. As a consequence, new high profile contracts valued at in excess of£15m have been secured in Southern Africa. In Ireland trading continues to be buoyant across all key skill groups on bothsides of the border with organic turnover growth of 16% being generated in theyear and profit margins tending to be on average approximately 4% higher thanthe WYG Group average. It is intended to introduce town planning skills to theIrish business in the near future and to significantly expand the range ofmanagement services available to clients in the Republic of Ireland. This willbe achieved either organically or by acquisition. In the UK, market conditions continue to be favourable with continuing highlevels of investment in health and education being more than matched by asignificant increase in private sector development work covering residential,commercial and leisure activities. Turnover in the transportation andinfrastructure sector has also increased by approximately 20% in the yeardespite only nominal growth from the rail industry which remains relativelysubdued. The success of the London 2012 Olympic bid is considered to be excellent newsfor the industry as a whole and for WYG in particular, as the Group shouldbenefit from the role already played in providing early environmental andinfrastructure consultancy services at many of the key venues, on behalf of theLondon Development Agency (LDA). The overall spend will be significant withconsultancy appointments likely to be amongst the first major contracts to beplaced by the LDA, Transport for London and, ultimately, the Olympic DevelopmentAgency. The successful integration of the 2004 acquisitions into WYG is apparent fromthe financial results and operating review for the year to June 2005. Inaddition to the success of the international business referred to above, theintroduction of cost consultancy skills to WYG in Ireland through theacquisition of Denis Rooney Associates has been very successful. WYG is now ableto offer clients in both Northern Ireland and the Republic of Ireland a fullyintegrated and professionally managed multi-skilled service covering all keystrategic skills. Similarly the broadening of WYG's town planning business tocover the important residential market, through the acquisition of HawthorneKamm, has also created the opportunity for WYG's environmental andtransportation teams to quickly establish a strong reputation in that sector. Adopting a consistent ethos and clear corporate strategy continues to drive allkey business decisions including, in particular, the Group's acquisition,business development and recruitment policies. That strategy is owned equallyby the management and staff and is the cornerstone of the strength, stabilityand resilience of the business. It comprises the following key elements: • commitment to a fully integrated business with single branding; • development of complementary professional skills around the asset life cycle; • maintaining a diverse and flexible sector penetration; • avoiding disproportionate client or sector dependencies; • establishment of high level strategic corporate relationships with clients; • commitment to excellence through the WYG Business Excellence Model; and • development and empowerment of all staff. Outlook The outlook for WYG is very positive and exciting. Having achieved a stepchange in the size, profile, skills base and geographic reach of the Company inthe year to June 2005 a positive momentum has been established from whichfurther significant progress can, and will be made in the years ahead.Particular areas of opportunity are as follows: • The internationalisation of WYG's traditional skills has only just begun but the platform established in 2005 through the acquisition of IMC Consulting is already beginning to reap rewards; • The introduction of cost management skills into Ireland has been a great success and offers a model for similar skills diversification in Great Britain; • The benefits accruing from the introduction and rapid growth of strategically important town planning skills in England and Wales encourages a similar strategy to be adopted in Scotland and Ireland; • The success of the London 2012 Olympic bid has already brought benefits to WYG and the opportunities for further involvement in the months and years ahead are significant for all of WYG's key skill groups; and • The opportunity to increase WYG's penetration of the operating phase of the asset life cycle, both organically and through acquisition, where the focus on white collar professional services will continue. Trading conditions generally remain favourable in both the domestic andinternational markets and WYG's ability to sit astride both the public and theprivate sectors will enable the Group to continue to benefit from committedinvestment in health, education and other public services whilst also maximisingreturns from increasing activity in private sector markets. WYG therefore begins the new year with confidence. Market conditions arefavourable to sustain and feed the Group's ambitious corporate developmentplans, the business model that has delivered consistent growth in the past cancontinue to do so in the future and the professionalism, commitment andenthusiasm of a dedicated workforce can reach its full potential as WYG strivesto attain its vision to be leaders in the built, natural and social environment. CHIEF EXECUTIVE'S REPORT Introduction This year has been a year of significant progress and success for WYG withstrong growth in all key geographic markets, sectors and skill groups. Thatsuccess has been reflected in a year of record sales and profits with operatingmargin on net turnover exceeding 10% for the first time driven by a strongperformance across all areas of the business. As the profile of the businesscontinues to build there is a growing appreciation amongst clients of the widerrange of life cycle skills now available to them from within WYG which positionsthe Group very favourably for the future. WYG is above all else a people business and it is only through the exceptionaldrive, commitment and talent of its people at all levels that success isachieved. Those qualities are complemented by a corporate ethos whichencourages innovation and the release of entrepreneurial potential, such thatstaff feel empowered to take personal ownership of WYG's vision and values andtherefore live them in their own offices, in their own markets and in how theyrepresent WYG within the wider business community. It is that ethos thatcontinues to drive consistent double digit organic growth. Segmental Analysis by Geography WYG's overall business falls into three distinct geographic entities which breakdown by gross turnover as follows: Great Britain (UK excluding Northern Ireland) 63%Ireland (Republic of Ireland plus Northern Ireland) 13%International 24% • Great Britain Gross Turnover £91.2mNet Turnover £80.5mOperating margin on Net Turnover 9%Organic rate of turnover growth 12% The largest proportion of WYG's turnover continues to be generated in England,Scotland and Wales where all key WYG skills groups contribute to a grossturnover of £91.2m or 63% of the Group total. Trading conditions remainfavourable with a noticeable increase in private sector activity compared tothis time last year. Margins in the GB business are lower than the Groupaverage but there is scope for further improvement in certain areas of businessactivity. This is particularly so in the rail sector where disruptionassociated with further client re-organisation during the course of the year hasimpacted profits. • Ireland Gross Turnover £18.3mNet Turnover £15.8mOperating margin on Net Turnover 13%Organic rate of turnover growth 16% WYG Ireland contributes 13% of overall Group turnover and comprises engineering,environmental and management services skill groups under a dedicated chiefexecutive. WYG Ireland now employs over 280 people and operates as anintegrated all-Ireland business from offices in Belfast, Londonderry, Dublin,Limerick and Cork. It is rapidly becoming one of the largest multi-skilledconsultancies in Ireland. Market conditions in Ireland are buoyant at the present time, particularly inthe Republic of Ireland where GDP growth continues to outstrip that of the UK.As a consequence all WYG Ireland skill groups have enjoyed a successful yearwith profitability well ahead of equivalent returns in the UK. • International Gross Turnover £34.4mNet Turnover £20.0mOperating margin on Net Turnover 13%66% increase in net order book to £35.0m Trading conditions for WYG International's core social and economic regenerationconsultancy activities remain very favourable and this is apparent from a 66%increase in net order book to £35m in the year to June 2005. This representsalmost two years net turnover to be implemented over a four year period withgrowing confidence that this will strengthen further over the first six monthsof the new financial year. However this has been achieved against a backgroundof significant geographic re-focusing and a complete change in the EU biddingand funding mechanisms in the team's principal and most mature market in Poland. The latter development is associated with a move from accession fundingmanaged centrally to structural funding managed locally. The WYG Internationalteam have responded well to both of these challenges and are now reaping therewards with a flow of new contract awards over the summer months, includingmajor projects in South Africa and Poland. WYG's International business is dominated at the moment by social and economicregeneration work, although the policy of broadening the remit of the team toinclude the higher level project management of more technically focusedinfrastructure and environment projects is beginning to bear fruit. It is WYG'sintention to ultimately establish a sustainable business for all of WYG's moretraditional skills in each of the principal WYG International offices, althoughthis may take some time to come to full fruition. A good example of the type of project where the fusing of WYG's traditionalskills with those of the ex-IMC Consulting team can bring real added value is arecently secured project in Syria. This is a €10m EU funded contract to managethe modernisation of municipal administration throughout Syria utilising, forthe first time, many of WYG's traditional infrastructure, environmental andproperty related skills. The project focuses on strengthening the role,responsibility and capacity of local government in Syria in areas such as urbanplanning, property management, public-private partnerships, economicdevelopment, integrated public transport strategies, solid waste management andsustainability policies. It applies best practice from across Europe to sixpilot cities over an initial 42 month delivery period. Segmental Analysis by Skill Group WYG provides an integrated multi-skilled service to clients around the four keyskill groups of engineering, management services, environmental sciences andtown planning, and all of those skill groups are fully represented on the WYGGroup Operations Board. The balance of those skills has changed significantlyover the last eight years and that balance will continue to change in the futureas the business evolves to broaden its base even further. The breakdown ofgross turnover by skill set in the year to June 2005 was as follows: Engineering 49%Management Services 31%Environmental 16%Town Planning 4% • Engineering Although engineering now represents less than 50% of WYG's overall turnover itremains the largest single skill group generating more than £68m of grossrevenue, up 19% on the previous year, or 11% organic growth when thecontribution from acquisitions is excluded. Operating margins for engineeringservices vary considerably but generally range between 6% and 12% of netturnover. WYG now offers a full range of engineering skills to clients from all principaloffices including civil, structural, transportation, mechanical and electricalengineering disciplines. These are brought together to provide integratedsolutions on a wide range of projects including roads, bridges, railways,buildings, sewage treatment works, flood defences, ports, airports, waterwaysand numerous other important elements of the nation's infrastructure. WYG's growing reputation as a leading edge mechanical and electrical engineeringconsultant was confirmed when the Company was awarded the prestigious BuildingServices 'Large Consultancy of the Year' award in June 2005. In addition, WYG's highway engineering business achieved a significant milestonein August 2005 when Laing O'Rourke, with WYG as designer, was awarded the 'EarlyContractor Involvement' contract for the A1 Morpeth to Felton Improvement by theHighways Agency. This £84m project involves upgrading the existing singlecarriageway to dual two lane standard. The scheme also includes theconstruction of five bridges at grade separated junctions together with a major180m long three span bridge across the deeply incised River Coquet Valley whichis a designated 'Site of Special Scientific Interest'. • Management Services Management services is the collective term used within WYG to describe a widerange of non-design related skills including project management, propertymanagement, cost management, high level advisory services, dispute resolution,health and safety management, relocation management and energy management. Thisis the fastest growing skill group within WYG and enables the Group to establisha much more strategic relationship with clients than would otherwise be the casewith purely technical services. Management services is now the second largest skill group within WYG generatingover £47m of gross revenue, including a contribution of more than £34m from WYGInternational. Operating margins on net turnover are much higher frommanagement services than from engineering services varying between 12% and 20%.Discounting the significant turnover contribution from WYG International andother relevant acquisitions the underlying organic rate of growth of managementservices in the UK and Ireland was 16% in the year to June 2005. Of particular note in the period was the very positive impact that theintroduction of cost management services in Ireland has had on the profile andperception of the Group as a multi-skilled consultancy both north and south ofthe border. As a consequence WYG is now providing cost management services andengineering services on a range of high profile projects including the 'Investin Northern Ireland' headquarters building in Belfast and the £38m DownpatrickAcute Care Hospital. At the present time WYG provides cost management servicesto clients in GB through supply chain partnerships with other specialist supportconsultancies. • Environmental WYG provides a full range of environmental services to clients including noise,air and water quality, environmental management systems, ecology, environmentalimpact assessments, waste management, landscape and urban design, pollutioncontrol, geotechnical investigations, asbestos surveys and contaminated landremediation services. These now represent 16% of WYG's gross turnover or justunder £23m of annual revenue. The underlying organic rate of turnover growth ofenvironmental services within WYG is currently 14% per annum although in theyear to June 2005 total year on year growth of 28% was achieved with theassistance of acquisitions completed in the year. Operating margins on netturnover in the environmental sector vary between 10% and 16% depending both onskill and location. WYG is now recognised as being at the forefront of environmental thinking andbest practice by many national and international agencies tasked with protectingthe global environment against increasing threat. As an example, climate changeis at the forefront of the environmental challenges facing clients whether ingovernment or in business. Addressing this particular problem presents new andexciting challenges as regulatory policies are still evolving and new solutionsand methodologies have yet to be devised. A graphic example is the predicted rise in sea level squeezing outinternationally, nationally and regionally important wetland sites along thecoastal fringe, the loss of which would have a profound impact on UK wildlife ifreplacement areas could not be found. WYG Environmental has been appointed byEnglish Nature to utilise its ecological, soils and hydrological expertise todevise Replacement Wetland Design and Reporting Criteria in its 'CoastalSqueeze' programme so that practical replacement sites can be identified,secured and successfully established. • Town Planning WYG Planning has grown significantly over the last three years and is now one ofthe top ten planning consultancies in the UK with offices in most key regionalcentres in England and Wales. In the year to June 2005 gross turnover grew by94% from £3.1m to £6.1m whilst the underlying organic rate of turnover growthwas maintained at an impressive 17%. Operating margins on net turnover areamongst the highest in WYG varying between 15% and 20% compared to a Group wideaverage of 10%. There remains significant scope to further expand the geographic reach of WYGPlanning and it is hoped to extend planning skills to Ireland and Scotland inthe near future. More and more planning work is now being commissioned by national and regionalclients under long term framework contracts and WYG Planning is well positionedto take full advantage of this trend as a consequence of its national network ofoffices and readily available support skills. During the course of the yearimportant framework contracts were secured with Sainsbury's in the south westand south east regions, Linden Homes and the South West Regional DevelopmentAgency (SWRDA). The latter will extend to June 2009 and will be wide rangingfrom advice on specific major development proposals, through the planningapplication and planning policy stages to the presentation of public inquiryevidence on behalf of SWRDA. Sector Analysis The strength and resilience of WYG continues to be founded in the Group'sdiverse and balanced sector penetration which enables it to ride the sequentialpeaks of both public sector and private sector investment by being equallyresponsive to both opportunity and threat in any one sector. Having a businessethos built on flexibility in terms of resource allocation, management structureand business focus, and matching this with a real commitment to demonstrableexcellence and sustained client care in all sectors of business activity,enables WYG to minimise the impact of any fall off in investment in one sectorwhilst taking early advantage of any increase in investment in another. Thisphilosophy provides WYG with real resilience and stability and positions theGroup well to deliver consistent and sustainable growth. In the year to June 2005 the growth in private sector turnover in the UK andIreland outstripped that in the public sector for the second consecutive yearalthough both sectors grew in excess of 20% per annum. As a consequence theprivate sector element of WYG's domestic gross turnover increased from 42% to44% in the year with the public sector element, whilst growing significantly inquantum terms, reduced as a proportion of gross turnover to 56%. These figuresexclude the impact of WYG International's contribution to gross turnover as thiswould distort the trend analysis. Private sector turnover in the UK and Ireland increased in the year by anaverage of 28% or £10.7m in quantum terms. This was dispersed across all of thefollowing key private sector markets with the largest increase of 70% beingexperienced in the commercial, leisure and residential development sector: Power and Utilities Up 22%Industry Up 23%Development Up 70%Retail Up 2%Financial Services Up 16% Public sector turnover in the UK and Ireland also increased in the year but atthe slightly slower pace of 22% per annum with the most significant increasesbeing in the health and education sector as shown below: Transportation and Infrastructure Up 20%Health and Education Up 32%Law and Order Up 8%Defence Up 26% It is of note that, as anticipated, last year's reduction in defence relatedwork has been reversed as the large regional prime contracts awarded in 2004 arenow settling down into steady state implementation. The large increase inhealth and education business was equally spread between both of thosesub-sectors whilst almost all of the growth in the transportation andinfrastructure sector was generated by the highways and traffic market with onlymarginal growth from the rail industry. Life Cycle Professional Services Planning Phase 42%Implementation Phase 42%Operating Phase 16% WYG provides professional consultancy services to blue chip clients across allkey sectors of the UK and Irish economies, supporting them in the planning,implementation and operation of their built assets, the efficient andsustainable utilisation of their natural assets and the development ofmanagement systems and processes associated with those assets. This range ofservices from initial planning through to eventual replacement embraces boththeir investment and operational activities. Although many of WYG's skills and services are utilised throughout an asset'slife cycle, others are specific to particular stages of the cycle. During the planning phase of the asset or project WYG's town planning,regeneration, environmental, geotechnical, transportation and utility servicesskills are of particular importance as they determine the viability and wholelife cost profile of any capital investment proposal. They also represent anopportunity for early involvement in the procurement process. Examples of major projects on which WYG has been appointed to providestrategically important planning phase services in 2005, include the following: • Environmental support to the London Development Agency at four of the London 2012 Olympic venues; • Conceptual engineering, transportation and environmental services to Balfour Beatty, preferred bidder on the £520m Birmingham New Hospitals PFI project. Financial and contractual close is imminent following which the project will proceed to the implementation phase; and • Enabling services to facilitate the regeneration and development of Wolverton Park. The scheme is part of Wolverton Regeneration Strategy and is based on the redevelopment of part of the former Wolverton Rail Works site, including Grade II listed buildings, with the whole area being located within the Wolverton conservation area. The scheme has an estimated total value of £71m and WYG is providing town planning, environmental, highways, traffic, rail engineering and utilities engineering consultancy services. During the implementation stage of the life cycle the more traditional WYGproject management and multidisciplinary design skills remain key to the successof that creative activity, irrespective of whether the procurement processinvolves public or private sector funding. Also of increasing importance duringthis stage of the process is sustainable design and a clear awareness of thewider health and safety implications of design decisions. Examples of major projects on which WYG has been appointed to provideimplementation phase services in 2005 include the following: • Lead designer for a major strategic upgrading and renewals programme at Kings Cross Station, London. The scope of work includes new access arrangements, roofing replacement works and improvement programmes throughout the station. This major new project will include significant input from WYG's rail, environmental and engineering disciplines; and • Cost management services on the £60m Cathedral Quarter mixed use development in Belfast. The scheme consists of 132 residential apartments, a 150 bedroom international hotel, 611 space multi-storey car park, ground floor retail space and first floor office space. Finally, during the operational or maintenance phase, when the asset is actuallyput to use, be it a building, piece of infrastructure or utility supply, thenWYG's maintenance, facilities consultancy, property management, environmentalmanagement and occupational health and safety skills are in high demand. Examples of projects on which WYG has been appointed to provide operationalphase services in 2005 include the following: • Property management services to the Home Office civil estate across the UK providing 24/7 helpdesk facilities, the setting up and management of facilities management contracts and the establishment of asset registers and long term maintenance plans and budgets; • Environmental, inspection and evaluation services at County level on behalf of DEFRA in support of the flagship 'Cleaner Safer Greener Network' initiative to improve local environmental quality with particular reference to the street scene; and • Facilitation services to the CBI in support of the roll-out of their 'Contour' benchmarking tool to over 300 users. Contour is a facilitated, self assessment benchmarking tool which enables comparison of environmental, health and safety performance against a best practice model and a database of past users. Participating organisations also benefit from being able to identify areas of strength and establish where action is needed to drive improvement. The availability of all of these life cycle skills within WYG's in-houseresources enables the business to engage with key clients across the fullspectrum of their activities and responsibilities. It facilitates continuousand constructive dialogue with clients and provides significant opportunitiesbeyond the normal pattern of investment cycles. Long Term Framework Contracts Long term framework contracts represent an increasingly important part of WYG'soverall portfolio. They generate a continuous, substantial and reliable flow ofwork over a long period of time without the need to re-tender, or re-negotiate,individual contracts for each new project. They therefore provide long termvisibility of future earnings, reduce bidding and marketing costs, andfacilitate the establishment of long term collaborative relationships with boththe client and the supply chain. They also allow technical resources to be moreeffectively planned and deployed and, as a consequence, efficiency is graduallyincreased particularly when they comprise a large number of smaller individualprojects which are all similar in nature. Framework contracts now conservatively represent 48% of WYG's total order bookequating to £121m in quantum terms assuming no renewals. This is an increase of14% on the previous year and is spread across a total of 240 separate contractsacross the Group. The long term nature of these contracts is reflected in thefact that over 50 of them, worth approximately £68m in forward fees, now extendup to or beyond 2010. Examples of important new framework contracts securedduring the course of the year to June 2005 include the following: • The Office of Government Commerce has awarded WYG a national framework contract for a wide range of property related professional services to be made available to all Central Government departments and Local Authorities for a period of four years commencing in November 2004. The purpose of the framework is to provide property managers with access to independent multidisciplinary professional support, advice, assistance, planning and project management services to supplement their in-house teams. • QinetiQ has appointed WYG as the sole provider of Professional Consultancy Services in support of their Long Term Partnering Arrangement (LTPA) with the MoD. WYG will provide a wide range of multidisciplinary consultancy support to construction activities across the QinetiQ estate including Boscombe Down and the South Coast, West Wales, Cumbria, Scotland and the Hebrides. The LTPA between MoD and QinetiQ is the single largest Prime Contract signed byMoD and has a 25 year duration. The QinetiQ sites are located throughout the UKand will provide ongoing commissions to the business in diverse locations. • Transport for London (TfL) has appointed WYG to their Engineering and Project Management Framework Agreement for the provision of Rail Engineering services. The framework will last for a 4 year period and support delivery of TfL's £10 billion investment programme. Order Book WYG's net order book has increased in the year by 27% to a total of £253mcomprising £121m from framework contracts and £132m from individual projects.Orders of £100m already secured for 2006 are equivalent to 86% of the 2005 netturnover. This is an extremely strong position to be in at the beginning of theyear given that WYG's average monthly net order intake for the 12 months ending30 June 2005 was £10.5m per month. Summary WYG approaches the new financial year with confidence and optimism havingdelivered yet another year of double digit organic growth, an order book atrecord levels and an operating margin on net turnover of 10%. Market conditions in the UK and Ireland continue to be favourable across boththe public and the private sectors whilst an effective platform has now beenestablished for future international growth. The award of the 2012 OlympicGames to London also provides a further boost to business with professionalconsultancies likely to be amongst the first to benefit. There are also increasing opportunities to broaden the base of the businessthrough the selective acquisition of strong businesses that offer real addedvalue potential. WYG is grateful for the support and commitment of all stakeholders and looksforward with enthusiasm to delivering further success in the year ahead. Consolidated profit and loss accountFor the year ended 30 June 2005 2005 2004 Note £'000 £'000Turnover - Continuing operations 142,129 89,850- Acquisitions 1,777 - 143,906 89,850Operating expenses (134,209) (83,323) Group operating profit - Operating profit before goodwill amortisation 11,580 7,584- Goodwill amortisation (1,883) (1,057) 9,697 6,527 - Continuing operations 9,549 6,527- Acquisitions 148 - Profit before interest 9,697 6,527Net interest payable (1,549) (723) Profit before tax 8,148 5,804Tax 2 (2,849) (1,926) Profit for the financial year 5,299 3,878Dividends 3 (2,636) (2,319) Retained profit for the year 2,663 1,559 Earnings per share 4Basic 13.2p 11.1pDiluted 13.0p 10.7p Adjusted earnings per share 4Basic 18.0p 14.2pDiluted 17.6p 13.6p Dividend per share 3 6.5p 5.9p Consolidated balance sheetAs at 30 June 2005 2005 2004 £'000 £'000 Fixed assetsIntangible assets 34,917 34,010Tangible fixed assets 9,999 7,135 44,916 41,145Current assetsWork in progress 28,772 24,030Debtors 39,987 34,401Cash at bank 5,579 4,586 74,338 63,017Creditors: amounts falling due within one year (50,899) (39,587) Net current assets 23,439 23,430 Total assets less current liabilities 68,355 64,575 Creditors: amounts falling due after more than one year (13,954) (14,844) Net assets 54,401 49,731 Capital and reserves Called up equity share capital 2,050 1,995Shares to be issued 1,550 2,433Share premium account 33,554 30,676Profit and loss account 17,247 14,627 Equity shareholders' funds (note 5) 54,401 49,731 Consolidated cash flow statementFor the year ended 30 June 2005 2005 2005 2004 2004 £'000 £'000 £'000 £'000 Net cash inflow from operating activities (note 6) 12,756 7,764 Returns on investment and servicing of finance Interest received 9 12Interest paid (1,230) (462)Interest element of finance lease rentals (336) (282) (1,557) (732)Tax paid (2,673) (1,653) Capital expenditure and financial investmentPurchases of tangible fixed assets (2,662) (171)Sale of tangible fixed assets 196 317Purchase of own shares for Employee Benefit Trust - (150) (2,466) (4) AcquisitionsPurchase of subsidiary undertakings (1,521) (13,338)Cash balances acquired with subsidiaries 143 2,213 (1,378) (11,125) Equity dividends paid (2,423) (1,895) Net cash inflow (outflow) before financing 2,259 (7,645) Financing Issue of ordinary shares 70 8,912Bank loan 7,873 10,000Bank loan repayments (8,689) (4,391)Loan note repayments (74) (185)Capital element of finance lease rentals andhire purchase contracts (2,832) (2,453) (3,652) 11,883 (Decrease) increase in cash during the year (note 7) (1,393) 4,238 Statement of group total recognised gains and lossesFor the year ended 30 June 2005 2005 2004 £'000 £'000 Profit for the financial year attributable to shareholders 5,299 3,878Currency translation differences (440) (570)Total recognised gains and losses for the year 4,859 3,308 1. Financial information The financial information in this preliminary announcement does not constitutestatutory accounts within the meaning of s240 of the Companies Act 1985.Statutory accounts for the year ended 30 June 2005 will be dispatched toshareholders by 11 October 2005 for approval at the Annual General Meeting to beheld on 8 November 2005. The statutory accounts contain an unqualified auditreport and will be delivered to the Registrar of Companies in accordance withs242 of the Companies Act 1985. 2. Tax 2005 2004 £'000 £'000UK corporation tax at 30% (2004: 30%)- current year 2,659 1,648- prior year (14) 241Overseas tax- current year 190 178- prior year 43 (53)Current tax 2,878 2,014Deferred tax - prior year (29) (88)Total tax 2,849 1,926 3. Dividends 2005 2004 £'000 £'000Interim paid 2.4p (2004: 2.2p) per share 955 851Final proposed 4.1p (2004: 3.7p) per share 1,681 1,468 2,636 2,319 4. Earnings per share The calculations of basic earnings per share are based on the weighted averagenumber of shares in issue during the year ranking for dividend of 40,005,473(2004: 34,869,291). Diluted earnings per share is calculated after the effect ofdilutive share options of 345,987 (2004: 114,118) and of shares to be issued inrespect of acquisitions of 564,489 (2004: 1,210,448). Earnings per share is calculated as follows: 2005 2004 £'000 £'000 Profit for the financial year 5,299 3,878 Earnings per shareBasic 13.2p 11.1pDiluted 13.0p 10.7p 4. Earnings per share (cont'd) Adjusted earnings per share is also presented in order to give an indication ofthe underlying performance of the Group and is calculated as follows: 2005 2004 £'000 £'000Profit for the financial year 5,299 3,878Goodwill amortisation 1,883 1,057 7,182 4,935 Adjusted earnings per shareBasic 18.0p 14.2pDiluted 17.6p 13.6p 5. Reconciliation of movements in group shareholders' funds 2005 2004 £'000 £'000 Profit for the financial year 5,299 3,878Dividends (2,636) (2,319) 2,663 1,559New share capital issued 2,933 14,576Shares to be issued (883) 1,658Currency translation differences (440) (570)Employee Benefit Trust 397 (61)Movement in equity shareholders' funds during the year 4,670 17,162Equity shareholders' funds at beginning of year 49,731 32,569Equity shareholders' funds at end of year 54,401 49,731 6. Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £'000 £'000 Operating profit 9,697 6,527Depreciation 3,368 2,613Loss on sale of fixed assets 96 74Amortisation of intangible assets 1,883 1,057Options charge 428 89Increase in work in progress (4,621) (2,309)(Increase) decrease in debtors (4,742) 296Increase (decrease) in creditors 6,647 (583)Net cash inflow from operating activities 12,756 7,764 7. Reconciliation of net cash flow to movement in net debt 2005 2004 £'000 £'000 (Decrease) increase in cash during the year (1,393) 4,238Cash outflow (inflow) from decrease (increase) in debt and lease financing 3,722 (2,971)Change in net debt resulting from cash flows 2,329 1,267Debt and finance leases assumed on acquisitions (94) (6)New finance leases (3,468) (3,069)New loan notes (74) (185)Currency translation differences 117 -Movement in net debt during the year (1,190) (1,993)Net debt at beginning of year (14,232) (12,239)Net debt at end of year (15,422) (14,232) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
WYG