26th Sep 2006 07:00
White Young Green PLC26 September 2006 For Immediate Release 26 September 2006 WHITE YOUNG GREEN PLC Preliminary results for the year ended 30 June 2006 White Young Green Plc, consultant to the built, natural and social environment,announces its preliminary results for the year ended 30 June 2006. Highlights: - 16% increase in revenue to £167.5m (2005: £143.9m)- 24% increase in profit before tax and acquired intangible amortisation to £11.65m (2005: £9.4m)- 18% increase in profit before tax to £11.1m (2005: £9.4m)- 18% increase in adjusted earnings per share to 20.0p (2005: 17.0p)- 10% increase in earnings per share to 18.6p (2005: 16.9p)- 11% increase in dividend per share to 7.2p (2005: 6.5p)- 23% increase in net order book to a record of £310m (2005: £253m)- 94% of 2006 net revenue already secured for 2007- Operating margin on net revenue increased to 10.3% (2005: 9.7%)- Five strategic acquisitions completed in the year- Ninth consecutive year of double digit organic growth Commenting on the results, Chairman Peter Wood said: "I am delighted to be able to report another year of excellent progress andsignificant success for White Young Green. The outlook continues to be verypositive and exciting. The recent acquisition activity and a continued focus onstrong underlying organic growth, provides a firm foundation for enhancedincremental growth in the year ahead. " 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 I am delighted to be able to report another year of excellent progress andsignificant success for White Young Green ("WYG"). For the ninth successiveyear WYG has achieved a record level of revenue, profit, order book and earningsper share, and has also delivered a further improvement in operating margin asthe Group has focused on higher value activities at the strategic end of clientrelationships. This strong financial performance has been underpinned by a year ofunprecedented success in work-winning with net order book up 23% to £310m (2005:£253m), of which £124m is already secured for 2007. This is equivalent to 94%of the 2006 net revenue total (2005: 86%). The year to 30 June 2006 has been an important period in WYG's corporatedevelopment. A total of five strategically important acquisitions were securedin the period with all but one of those transactions being completed in thesecond half of the year. These acquisitions have added approximately £21m togross revenue on an annualised basis and have also significantly broadened andstrengthened the range of complementary life cycle skills now available toclients from the Group's in-house resources. The introduction of cost managementand commercial project management skills to Great Britain is particularlyimportant as these are higher value client support services, but so too is thestrengthening of those skills in the Republic of Ireland and the introduction oftown planning and urban design skills to the Scottish and Irish markets. InMarch 2006 WYG completed a placing raising £7.2m which provided the Group withfurther financial resources to support its acquisition strategy. The year has therefore not only been successful in its own right, it has alsoprovided a platform for even stronger growth in 2007 as a consequence of theacquisitions in the second half of the year and the potential for enhancedorganic development that they provide. Trading conditions around the Group remain very favourable and opportunities areincreasing in all key areas of business activity. Results WYG is now required to prepare accounts in accordance with InternationalFinancial Reporting Standards ("IFRS"). As a consequence the comparativefigures in the published results have been restated to reflect this change. Gross revenue grew by 16% in the year to £167.5m (2005: £143.9m) and included acontribution of £5.8m from acquisitions completed during the course of the year.The underlying growth in revenue from continuing operations was 10%. Revenueattributable to third parties, on which the Group does not make a margin,increased to £34.6m (2005: £27.6m) as a consequence of the continued use of awide range of specialist sub-consultants in the international arena. Revenuenet of payments to third parties therefore grew by 14% in the year to £132.9m(2005: £116.3m). Operating profit before amortisation of acquired intangible assets increased by21% to £13.7m (2005: £11.3m) and included a contribution of £0.7m fromacquisitions completed during the course of the year. Operating profit afteramortisation of acquired intangible assets increased by 16% to £13.1m (2005:£11.3m). Operating margin, calculated as operating profit before amortisation of acquiredintangible assets divided by revenue net of payments to third parties improvedfurther to 10.3% (2005: 9.7%) reflecting the improved mix of business generatedin the year. Earnings per share adjusted to exclude amortisation of acquired intangibleassets increased by 18% to 20.0p (2005: 17.0p). Unadjusted earnings per sharein the year increased by 10% to 18.6p (2005: 16.9p). The balance sheet remains strong. Overall working capital days increased in theperiod to 95 days (2005: 85 days) due, in part, to changes in the way that theadvance payments enjoyed by WYG International are now processed by the EU.Gearing, defined as net debt divided by total net assets, increased in the yearto 38% (2005: 30%). Net debt at the year end was £28.8m (2005: £15.4m) with themajority of the increase in debt due to the cash paid as part of the significantacquisition activity undertaken in the year. Interest was covered 6.8 times(2005: 6.0 times) by operating profit before amortisation of acquired intangibleassets. Dividend It is proposed that the final dividend be increased by 12% to 4.6p per share(2005: 4.1p) making a total for the year of 7.2p (2005: 6.5p). The dividend iscovered 2.8 times (2005: 2.6 times) by adjusted earnings per share and 2.6 times(2005: 2.6 times) by basic earnings per share. The final dividend will be paidon 12 December 2006 to shareholders on the register at 6 October 2006. Acquisitions WYG has completed five acquisitions since 1 July 2005 for a total initialconsideration of £26.8m, comprising Doy Webster in November 2005, J C Warnock inFebruary 2006, Farningham McCreadie and Tweeds in March 2006 and Nolan Ryan inJune 2006. Each of these acquisitions is complementary to the existingoperations of WYG and together they would have added approximately £21m to Grouprevenue on an annualised basis. The acquisition of Doy Webster further strengthens WYG's business in thestrategically important South East of England and increases capacity in buildingservices at a time of increased opportunity in that area. J C Warnock, a civil and structural engineering consultancy based inLondonderry, enables WYG Ireland to broaden its geographic spread to providefull coverage in the North West of the island. Tweeds significantly expands WYG's Management Services business in the UK addingcomplementary skill sets in quantity surveying, commercial project managementand health and safety management. It operates from six offices in the UK andwill significantly enhance the range of services available to all clients of thebusiness. Farningham McCreadie, a town planning consultancy based in Edinburgh andBelfast, expands the geographic coverage of WYG's successful town planningbusiness bringing with it an excellent reputation and a strong private sectorclient base. The acquisition of Nolan Ryan is a major step forward in the continuingdevelopment of WYG in Ireland. It is a quantity surveying and projectmanagement business employing 70 staff across five offices in the Republic ofIreland. It will enable WYG, as one of the largest multi-skilled consultantsoperating in Ireland, to take full advantage of the buoyant trading conditionsbeing experienced there. Review of Operations Operational highlights for the year to 30 June 2006 include the following: • 23% increase in net order book to £310m (2005: £253m)• 94% of 2006 net revenue already secured for 2007 (2005: 86%)• 45% of net order book in long term framework contracts extending to 2012• 52% / 48% public / private revenue split in UK and Ireland• 26% revenue growth in private sector business• 9% revenue growth in public sector business• Revenue up across all key public and private sector markets The largest proportion of WYG's revenue continues to be generated in England,Scotland and Wales ("GB") where all three key skill groups of Engineering,Management Services and The Environment contributed to gross revenues up 18% to£107.9m (2005: £91.4m). This represents 64% of total Group revenues. Tradingconditions in GB remain very favourable, driven by Central Government'scontinued commitment to investment in health and education, a more stable andconfident rail industry, local government outsourcing and urban regeneration, anincrease in legislation in the energy and environmental markets, a moreconfident private sector and, of course, the 2012 Olympic Games from which WYGis already deriving benefit. The outlook for 2007 is therefore veryencouraging. WYG Ireland is now one of the largest multi-skilled consultancies operatingacross Ireland having grown revenue in the year by 23% to £22.6m (2005: £18.3m).This represents 14% of total Group revenue. Trading conditions in Ireland arebuoyant across all three WYG skill groups driven by strong GDP growth in theRepublic of Ireland ("ROI"), major infrastructure commitments in the ROINational Plan, an increasing interest in PPP as an investment model, EUenvironmental legislation particularly in the context of water quality, a veryactive private sector on both sides of the border and further investmentassociated with tourism and urban regeneration in both Dublin and Belfast. WYG International, the management consultancy arm of WYG providing high levelsocio-economic regeneration services to the aid funded development market, hashad another successful year with order book up 20% to £42.0m (2005: £35.0m),revenue up 8% to £37.0m (2005: 34.4m) and operating margin on net revenue up at14% (2005: 13%). WYG International now represents 22% of total Group revenue.The process of diversifying WYG International to include the high level projectmanagement and delivery of more technically focused infrastructure andenvironmental projects gathered further pace in 2006. From a zero base in June2004 the team is now actively engaged on seven technical projects coveringsubjects such as transport planning, solid waste management, water andwastewater, building conservation, building structures and utility pipelines.In addition WYG International has been shortlisted for a further nine donorfunded projects in similar functional areas, valued collectively at in excess of£26m. The future prospects for this new area of opportunity are thereforeextremely positive. The balance between the three key WYG skills groups of Engineering, ManagementServices and The Environment continues to evolve in line with the increasingemphasis on higher value, higher margin strategic services and full life cycleasset management support. In the year to June 2006 all three skill groupsdelivered strong revenue growth although The Environment grew most significantlyup 35% in the year, followed by Management Services up 14% and Engineering up11%. This evolutionary change in the business mix is one of the key driversbehind the continuing improvement in operating margins across the Group as awhole. Across all three skill groups it is apparent that private sector business is nowgrowing at a faster pace than public sector business with the former nowrepresenting 48% of total WYG revenue in the UK and Ireland, up from 44% in2005. This balance of private sector and public sector business continues toenable WYG to take full advantage of periodic changes in investment patternsacross both sectors. In the year to June 2006 the Group was able to benefitfrom particularly strong growth in private sector development work, covering thecommercial, leisure and residential markets, where revenues were up by 46% to£26.2m (2005: £17.9m). This sector now represents 21% (2005: 16%) of totalGroup revenues in the UK and Ireland. Of particular strategic importance in the year has been the introduction of costmanagement (quantity surveying) and commercial project management skills into GBand the strengthening of those skills in Ireland through the acquisition ofTweeds and Nolan Ryan respectively. These are key front end, client supportskills which will enable WYG to engage much more fully and much more closelywith clients in the future. The scope for future growth in these higher value,higher margin areas of business is significant. Board of Directors At the start of the financial year Richard McCaffrey joined the Board in anexecutive capacity as Chief Operating Officer. Richard has been with WYG sinceJuly 2000 and is now responsible for the day to day management of WYG'soperational business. The Board has since decided that the Group would benefit from the experience ofan additional non- executive director. The recruitment process is currentlyunderway and an announcement is expected in the near future. Employees WYG now employs over 2,500 people across the Group. It is, first and foremost,a people business. A variety of initiatives are currently underway to develop and retain highcalibre staff who are committed to helping WYG achieve its ambitious growthtargets. I take this opportunity to thank all staff for their enthusiasm anddedication in the delivery of high quality services to clients over the courseof the year. Outlook The outlook for WYG continues to be very positive and exciting. The recentacquisition activity, and a continued focus on strong underlying organic growth,provides a firm foundation for enhanced incremental growth in the year ahead. Trading conditions remain very favourable in both the domestic and internationalmarkets and WYG's ability to sit astride both the public and the private sectorswill enable the Group to continue to benefit from committed investment inhealth, education, transportation and other public services whilst alsomaximising returns from the increasing activity in private sector markets. In the longer term WYG's Corporate Development Plan to 2010 is exciting andambitious. It includes entry into new markets, international expansion, thefurther strengthening of the new higher value skills recently introduced intothe Group and a clear focus on the demand side of the economy, both at home andabroad. It builds on success, it releases potential and it offers allstakeholders the opportunity to participate in, and share the benefits from, anunprecedented period of growth and opportunity. WYG therefore enters the newfinancial year with continued confidence and optimism. BUSINESS REVIEW In the year to 30 June 2006 the Group has made excellent progress on its journeyof growth and development. Unprecedented volumes of new business have beensecured, order book has increased significantly, five strategically importantacquisitions have been successfully completed, double digit organic growth hasbeen delivered for the ninth successive year, operating margins on net revenueabove 10% have been improved further, and cost management (quantity surveying)skills have been introduced to mainland UK for the first time through theacquisition of Tweeds in March 2006. The period has therefore provided aplatform for even stronger growth in the year ahead. WYG's expansion over recent years has been as a consequence of careful strategicplanning and effective risk management covering a broad range of issuesincluding market analysis, skills development, procurement reform, investmenttrends, resource availability, relationship management, socio-politicaldevelopments and economic forecasts. As a consequence the Group hassuccessfully achieved its initial objectives set out in a series of corporatedevelopment plans, including the introduction of new skills, penetrating newmarkets, opening up new territories, raising margins, controlling workingcapital, generating incremental growth at a rate of 25% per annum anddiversifying the business away from a disproportionate dependence on capitalinvestment. This has provided the secure platform from which the Group can nowspring forward at an increased pace over the next few years to establish itselfas a true leader in the built, natural and social environment, both at home andinternationally. In that respect the WYG Corporate Development Plan to 2010 isexciting, ambitious and ground breaking. It builds on success, it releasespotential and it offers all stakeholders the opportunity to participate in, andshare the benefits from, an unprecedented period of growth and opportunity. Success in a people business is achieved through the exceptional commitment,determination, professionalism and imagination shown by staff at all levelsthroughout the business. Those qualities are matched 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.Those values of quality, teamwork, innovation, adaptability, integrity, caringand client focus underpin how people behave towards each other within WYG aswell as how they present themselves externally. The successful application ofthose values is recognised each year in a series of staff prizes and is testedannually by a comprehensive staff satisfaction survey. CORPORATE DEVELOPMENT PLAN WYG's Corporate Development Plan to 2010 establishes the means by which theGroup can, at the very least, maintain the accelerated rate of incrementalgrowth delivered since 2004. It places particular emphasis on the global marketand the internationalisation of WYG's more traditional skills. It recognisesthe importance of further strengthening the infrastructure skills within theGroup to assist in maximising opportunity both at home and abroad. It envisagesenergy, in the widest sense, becoming a much more significant area of activityfor the Group. It anticipates Management Services, including Cost Managementand Project Management, generating a much larger share of Group revenues in thefuture. TRADING PERFORMANCE SUMMARY The year to 30 June 2006 was again a period of strong revenue and profit growthboth at home and in the international arena. Gross revenue grew by 16% of which10% was organic after excluding contributions from the acquisitions completed in2005 and 2006. Private sector revenue in the UK and Ireland grew by 26% in theyear, compared to 9% in the public sector, and now comprises 48% of WYG's totalincome from that market. This balance of private sector and public sectorbusiness continues to enable WYG to take full advantage of periodic changes ininvestment patterns across both sectors. Profit before tax and the amortisation of acquired intangibles increased by 24%to £11.7m (2005: £9.4m) assisted by a further improvement in margins at bothgross and net level. Operating profit before the amortisation of acquiredintangibles expressed as a percentage of gross revenue increased to 8.2% from7.9% in 2005. Similarly operating profit before the amortisation of acquiredintangibles expressed as a percentage of net revenue increased to 10.3% (2005:9.7%). WYG is therefore being successful in driving margins up whilst alsogenerating significant revenue growth, as a consequence of the change inbusiness mix and the continuing focus on higher margin activities at thestrategic end of client relationships. WYG's business falls into three distinct skill groups and three distinctgeographic entities. Each constituent element has delivered strong revenuegrowth in the year to 30 June 2006. TRADING PERFORMANCE BY SKILL GROUP WYG provides an integrated multi-skilled service to clients in the UK andIreland around the three key skill groups of Engineering, Management Servicesand The Environment. The balance of those skills within the Group continues toevolve in line with the increasing emphasis on higher value, higher marginstrategic services and full life cycle asset management support. In the year to30 June 2006 Engineering and Management Services grew in quantum terms butreduced as a proportion of total Group revenue to 45% (2005: 47%) and 32% (2005:33%) respectively. On the other hand The Environment increased its contributionto total revenue to 23% (2005: 20%). All of this should be set against totalGroup revenues increasing by 16% in the period and the overall operating marginon net revenue improving further to 10.3% (2005: 9.7%). Across all three skill groups it is apparent that private sector business is nowincreasing at a faster pace than public sector work. In particular, privatesector development work covering the commercial, leisure and residential marketsincreased in the year by 46% to £26.2m (2005: £17.9m) and now represents 21%(2005: 16%) of total Group revenue in the UK and Ireland. This sits alongsideinfrastructure at 23% (2005: 24%) and health and education at 17% (2005: 18%)demonstrating once again the balance in the Group's sector penetration. It isanticipated that in 2007 private sector revenues within WYG will exceed publicsector revenues for the first time since 2002. This reflects both the changesin investment patterns across the UK and Irish economies and the business mixbrought to the Group by the 2006 acquisitions. 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. Private sector revenue in the UK and Ireland increased in the year by an averageof 26% to £60.8m (2005: £48.4m). This represents 48% of total domestic revenueand was dispersed as follows across all of the key private sector markets: • Power and Utilities Up 16% to £8.7m• Industry Up 21% to £13.1m• Development Up 46% to £26.2m• Retail Up 14% to £8.2m• Financial Services Up 42% to £2.9m Public sector revenue in the UK and Ireland increased in the year by 9% to£66.5m (2005: £61.1m). This represents 52% of total domestic revenue and wasdispersed as follows across all of the key public sector markets: • Transportation and Infrastructure Up 13% to £29.7m• Health and Education Up 10% to £21.6m• Law and Order Maintained at £8.5m• Defence Up 2% to £6.7m Almost all of the public sector gains achieved in the year were generatedorganically as approximately 95% of the revenue from the 2006 acquisitions isderived from private sector clients. Engineering Trading conditions for engineering services, both in the UK and Ireland, remainfavourable with strong sustainable growth being experienced at the present timein highways, rail infrastructure, health and education, private sectordevelopment work and industry generally. In the year to 30 June 2006 total Engineering revenues grew by 11% to £75.3m(2005: £68.1m) of which 8% was achieved organically, i.e. excluding thecontributions from the 2005 and 2006 acquisitions. However, the growth inoperating profit was higher, increasing by 13% to £4.6m (2005: £4.1m). Theoperating margin on net revenue was maintained at 7% (2005: 7%). In the major highways market WYG has consolidated its position as a majorprovider of engineering services during the course of the year. In March 2005the Group was appointed in partnership with Laing O'Rourke under an ECI (EarlyContractor Involvement) contract with Highways Agency to design and build animprovement to the A453. This 11.5km section of road, which links theNottingham Ring Road to the M1 Motorway at Junction 24, is currently a singlecarriageway which carries up to 33,000 vehicles per day and has an extremelypoor safety record. The improvement includes the provision of a dual carriagewaywith grade separated junctions for which the scheme budget is £83m and theprogramme delivery date is 'open to traffic' by 2011. The scheme is supportedby the Regional Assembly and a new junction near Ratcliffe will provide accessto the new Parkway rail station on the Midlands Main Line for the purposes ofintegrated transport. WYG has also been appointed by Network Rail to carry outthe engineering design of that new station. Activity in the rail sector recovered strongly in the year, following a verydifficult 2005. Total revenue was up 18% to £10.9m (2005: £9.3m) all of whichwas achieved organically. The business mix included major station enhancementand inspection works, track bed investigations, tunnel design, safetymanagement, geotechnical investigations and site management services. Thisincrease in activity is expected to gather pace as Network Rail delivers on thecommitment in its 2004 Business Plan to invest £20.5 billion on renewals overthe next four years in addition to the planned expenditure on the West CoastRoute Modernisation. In the private sector property development market WYG's engineering teams acrossthe country have benefited in the year from increased confidence and investmentfrom clients, particularly in the area of urban regeneration. One of the mostnotable projects of this type is the St. Stephens Development in the centre ofHull for ING Real Estate UK Ltd. This £200m retail-led mixed use developmentincludes extensive civil engineering enabling works and a comprehensivetransport interchange. Construction work is now proceeding on site and theproject is scheduled for completion in 2007. Of particular note in the healthcare sector was the financial close achieved inJune 2006 on the £553m Birmingham Acute and Adult Psychiatric Hospitals PFIproject. This project is one of the largest PFI healthcare projects outsideLondon and will provide over 1,300 beds across three hospitals. WYG is providinga wide range of engineering, environmental and planning supervisory services toBalfour Beatty on this landmark project. Other important engineering successes in the year include a four year nucleardecommissioning framework contract with British Nuclear Group at Sellafield inCumbria and a number of contractor-led appointments in support of the national "Building Schools for the Future" programme. Management Services Management Services, comprising project management, property management, costmanagement, health and safety management and social-economic advisory servicesaccounted for 32% of total WYG revenue in the year to 30 June 2006, up 14% to£53.4m (2005: £47.0m). The operating margin on net revenue was also strong at15% and, therefore, as this skill group increases as a proportion of total WYGrevenue in 2006, following the acquisition of Tweeds and Nolan Ryan in thefourth quarter of the 2006 financial year, then the overall Group operatingmargin should also strengthen further. Of particular note in the year to 30 June 2006 has been the introduction of costmanagement and commercial property management skills to WYG's portfolio ofcomplementary services in GB and the strengthening of those skills in Irelandthrough the acquisition of Tweeds and Nolan Ryan respectively. Both offersignificant potential for further organic growth in this strategically importantclient facing service area and both bring with them a strong order book andportfolio of new clients for the wider WYG business. Typical private sector development projects currently being undertaken by Tweedsinclude the project management of the £100m redevelopment and extension to EldonSquare Shopping Centre in Newcastle for Capital Shopping Centres and the £200mClapham Junction Shopping Centre for Delancy/Land Securities. Tweeds has alsorecently been appointed as employers representative and quantity surveyor on the£120m redevelopment of the former Marks and Spencers HQ building in BakerStreet, London for London and Regional Properties. WYG Management Services now comprises a balanced portfolio of private sector andpublic sector projects across both the UK and Ireland. In the public sector WYGhas recently been appointed by Defence Estates as Independent Certifier for thenext five years on the £1.15 billion PFI contract for the redevelopment andoperation of facilities on the MoD Northwood Headquarters site. This follows asimilar appointment earlier in the year on the £8 billion Allenby/Connaught PFIproject where WYG will oversee the construction phase of the project through to2016. This is the largest PFI project in the defence programme with aconstruction budget of £1.2 billion. Using state of the art modular constructionmethods and traditional building techniques a comprehensive range of newfacilities will be delivered to 18,000 Army and civilian personnel at garrisonsin Aldershot and across Salisbury Plain. In Ireland, WYG Management Services continues to trade strongly, providing costconsultancy, building surveying and project management services to clients inboth Northern Ireland and the Republic of Ireland. The economy in Irelandremains buoyant and opportunities for further growth are significant. In theperiod WYG Management Services secured a number of new major projects includingPhase 2B of the Royal Victoria Hospital redevelopment in Belfast, St Anne'sSquare development, also in Belfast, and Disability Discrimination Act audits inLimerick and Tipperary. The acquisition of Nolan Ryan in June 2006 will significantly enhance WYG'smanagement services business in the Republic of Ireland by adding offices inWaterford and Kilkenny and strengthening the existing skills offering in Dublin,Limerick and Cork. The Environment 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, together with comprehensive town planning services,represent WYG's professional contribution to the protection and sustainabilityof our environment. This is now the fastest growing WYG skill group withrevenues up 35% in the year to June 2006 at £38.8m (2005: £28.8m) of which 20%was achieved organically. The environment now represents 23% of overall Grouprevenue and attracts an operating margin on net revenue of 14%. The environmental market has grown rapidly over recent years and is forecast togrow even further as the focus on climate change, the carbon agenda, wastemanagement and energy utilisation increases. Key drivers for growth willcontinue to be the volume and complexity of regulations and legislation, backedup by more vigorous enforcement, together with an increasing general awarenessof the potential impact on future generations. WYG's environmental skills have been utilised by a wide range of clients in theperiod including the London Development Agency on work associated with the 2012Olympic Games, the Environmental Agency, English Partnerships, Highways Agency,National Grid, West Sussex County Council and WRG, the waste management andenergy recovery group. WYG has also grown rapidly over the last five years to become one of the largesttown planning consultancies in the UK with offices in Edinburgh, Belfast, Leeds,Manchester, Leicester, Bristol, Cardiff, London and Southampton. During theyear WYG Planning was strengthened by the acquisition of Farningham McCreadie, atown planning and urban design consultancy, based in Edinburgh and Belfast.This acquisition enhances further the design related skills within WYG Planningas well as providing an important entry into the Irish market from whichsignificant further growth can be anticipated. Major clients of WYG Planning include Sainsbury's, Linden Homes, Barratt,Ericsson and Persimmon. Major projects on which WYG Planning is currentlyengaged includes the Gloucester Quays Redevelopment for Peel Holdings and a fouryear framework contract for English Partnerships to provide development planningservices on a national basis through to 2010. Town planning is very much a front end advocacy skill and, as such, it attractshigher margins. It also generates significant opportunities for other WYG skillgroups active in support of planning applications, appeals and enquiriesincluding, in particular, transportation and the environmental sciences. WYG's planning and environmental skills are also brought together to offerclients a comprehensive urban design and landscape architecture service in anarea of activity where planning and design are inextricably linked. A typicalexample is the recently secured Temple Quay Phase 2 project in Bristol forBarratt on which WYG Planning will be carrying out those services. TRADING PERFORMANCE BY GEOGRAPHY Great Britain The largest proportion of WYG's revenue continues to be generated in England,Scotland and Wales (GB), where all key skills groups contributed to grossrevenues up 18% to £107.9m (2005: £91.4m). This represents 64% of total Grouprevenues (2005: 63%). Trading conditions remain favourable across all three WYGskills groups in GB with the private sector growing strongly and the rail sectorrecovering well from a very difficult year in 2005. Management Services, whichrepresented 13% of GB revenues in 2006, will strengthen significantly in 2007 asa consequence of the acquisition of Tweeds in March 2006 and the introduction ofcost management services to the portfolio of skills now offered to clients.This diversification into another high margin business stream should also have abeneficial effect on GB operating margins in the coming year which, in 2006,were maintained at 9%. Key drivers for growth in this market in the coming year include CentralGovernment's continued commitment to investment in health and educationprogrammes, a more confident rail industry, local government outsourcing andurban regeneration, an increase in legislation in the energy and broaderenvironmental fields, a more confident private sector and the 2012 Olympic Gamesfrom which WYG is already deriving benefit. The outlook for 2007 is thereforevery encouraging. The impact of the 2012 Olympic Games will, of course, benefit the constructionindustry in general and the consultancy sector in particular, far beyond 2007.However, it is pleasing to be able to report early successes in the year to June2006: • WYG has been appointed by the Olympic Delivery Authority (ODA) todevelop proposals to enhance the existing marine facilities at Weymouth andPortland National Sailing Academy which will host the sailing events. Thismulti-million pound scheme includes the provision of new slipways, race boatparking, lifting and mooring facilities. WYG will be providing design,environmental and planning services as Lead Consultant. • WYG was appointed by the London Development Agency to provide arange of front end environmental, remediation and ground investigation servicesat a number of principal venues. • WYG has agreed to work in partnership with one of the internationalconsultancies responsible for the design of major venues at the Athens Olympicsin 2004. Ireland WYG Ireland is now one of the largest and most profitable multi-skilledconsultancies operating across Ireland, having grown revenue in the year by 23%to £22.6m (2005: £18.3m) and having improved the operating margin on net revenueto 14% (2005: 13%). The contribution from Ireland will grow further in thecoming year augmented by the acquisition of Nolan Ryan, a cost consultancyoperating across the Republic of Ireland, just before the year end on 29 June2006. The year to June 2007 will also benefit from a full 12 monthscontribution from J.C. Warnock Associates, a Londonderry based engineeringconsultancy which was acquired in February 2006. Notwithstanding theseacquisitions, organic growth was also very strong in the year to June 2006 at19% per annum (2005: 16%). Ireland therefore now contributes 14% of total WYGrevenue (2005: 13%) and the buoyant market conditions prevailing both inNorthern Ireland and in the Republic of Ireland will ensure that this share ofWYG activity will at least be maintained in the coming year and may indeedincrease. WYG now operates from seven locations across Ireland in Belfast, Londonderry,Dublin, Limerick, Cork, Waterford and Kilkenny and employs more than 350 staff.49% of WYG Ireland's business is generated in Northern Ireland and 51% in theRepublic of Ireland. Key drivers for growth in this market in the coming year include GDP growth inthe Republic of Ireland (ROI) significantly ahead of that in the UK, majorinfrastructure commitments in the ROI National plan, an increasing interest inpublic/private partnerships (PPP) as an investment model in the ROI, EUlegislation, particularly in the context of water quality and environmentalprotection, a very active private sector on both sides of the border and furtherinvestment associated with tourism and urban regeneration in both Dublin andBelfast. WYG Ireland was presented this year with the Association of Consulting Engineersof Ireland (ACEI) Presidents Award for 'Excellence in Design'. This award wasachieved as a consequence of the work undertaken on the Limerick Main DrainageProject, one of the largest water services infrastructure projects carried outin Ireland. Other notable projects undertaken by WYG in Ireland during thecourse of the year include the following: • The redevelopment of Sir John Rogersons Quay in Dublin Docklands.This £140m urban regeneration project involved the construction of a six storeyflat slab design in reinforced concrete over a deep basement, preceded by theremoval of hazardous ground contamination and soil mixing techniques to treatdeep contamination. WYG Ireland was engaged as civil, structural andenvironmental engineer on this project. • The Women's and Children's Hospital at Belfast Royal VictoriaHospital. WYG Ireland is providing quantity surveying, civil, structural,mechanical and electrical engineering services on this 60,000m2 specialisthealthcare project. It is a good example of WYG's key skills being broughttogether to offer an established client a fully integrated and managedmulti-skilled service. • The Integrated Wastewater Framework in Northern Ireland. WYGIreland is part of the project management team responsible for the delivery ofnew wastewater treatment and collection systems in the eastern region of theprovince including major capital works valued at £25m at four treatment plantsin Whitehouse, Carrickfergus, Moneyreagh and Seahill. International Trading conditions for WYG International's core social and economic regenerationconsultancy services remain very favourable with strong prospects for futuregrowth in all key regional centres. In Poland the transition from accessionfunding to locally managed structural funding has been seamless with a number oflong term projects now secured under the new arrangements. In Romania thepipeline of future work has strengthened significantly over the last six monthsand recent successes give confidence that real momentum is now beginning tobuild up after a relatively subdued 2006. In Africa the opportunities areconsiderable and the two major projects already secured in South Africa, whereWYG International is project managing the EU's investment in macro povertyalleviation in KwaZulu Natal and Eastern Cape Province, provide an effective andcredible bridgehead for further penetration into that significant new market forWYG. In Turkey the objective of EU accession will provide many opportunities inthe months and years ahead just as it did in Poland, Hungary and the CzechRepublic in the years preceding accession through the programme of accessionfunding. WYG International is well placed to be a major beneficiary of thatessential programme of preparatory work. Finally, in Russia and the rest of theformer Soviet Union, WYG International has already begun to diversify frominternationally funded public sector work to the private sector which is nowgrowing rapidly across the region. Projects in the mining, utilities and retailmarkets now dominate the WYG portfolio as donor funding begins to slow down withincreased strength in the Russian economy. In overall terms the order book inWYG International strengthened in 2006 by 23% to £42.0m (2005: £35.0m) and thevolume of bids and proposals currently being processed is at an unprecedentedlevel. In the year to 30 June 2006 WYG International grew revenue by 8% to £37.0m(2005: £34.4m) and increased operating margin on net revenues to 14% (2005:13%). This represents 22% of total Group revenues (2005: 24%). The process of diversifying WYG International to include the high level projectmanagement and delivery of more technically focused infrastructure andenvironmental projects gathered further pace in 2006. From a zero base in June2004 the team is now actively engaged on seven live technical projects coveringfunctional areas such as transport planning, solid waste management, water andwastewater, building conservation, building structures and utility pipelines.In addition WYG International has been short-listed for a further nine donorfunded projects in similar functional areas valued collectively at in excess of£26m. The future prospects for this new area of opportunity are thereforeextremely positive. ORDER BOOK WYG's net order book has increased in the year by 23% to a total of £310m (2005:£253m) comprising £140m from framework contracts and £170m from individualprojects. This is equivalent to a gross order book of approximately £390m at2006 gross to net ratios. Net orders of £124m already secured for 2007 areequivalent to 94% of the 2006 net revenue total. This compares to an equivalentfigure of 86% at the beginning of the 2006 financial year and signifies afurther relative strengthening of the order book. SUMMARY WYG enters the new financial year with continued confidence and optimism havinglaid the foundations for enhanced growth in the year ahead with a series ofstrategically important acquisitions in the second half of the year to June2006, an order book which is at record levels and a strong momentum in organicgrowth which has been consistently maintained at in excess of 10% for the lastnine years. The future for WYG is therefore positive and exciting. Market conditions continue to be very favourable both at home and abroad and theGroup is well positioned to benefit in the short term from the furtherstrengthening of the private sector commercial market as a consequence of itsdiverse sector penetration. Other areas of real opportunity for WYG includeincreased demand in transportation and infrastructure, an intensifying focus onenergy and climate change, the implications of London 2012 and an increaseddemand on public services as a result of anticipated demographic changes overthe next ten years. WYG's Corporate Development Plan to 2010 is ambitious and exciting butdeliverable. It will stimulate significant further growth in the period bothorganically and by acquisition. The acquisition pipeline remains strong and theopportunity to further broaden the base of the business and strengthen existingskills will be taken by continuing to focus on strong businesses that offer realadded value potential. WYG is grateful for the support and commitment of all stakeholders and looksforward with confidence to delivering further success in the year ahead. Consolidated income statementFor the year ended 30 June 2006 Note Before Before amortisation of Amortisation amortisation of Amortisation acquired of acquired acquired of acquired intangibles intangibles Total intangibles intangibles Total 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 ContinuingoperationsRevenue 2 167,487 - 167,487 143,906 - 143,906 Operating (153,817) (588) (154,405) (132,594) (42) (132,636)expenses Operating profit 2 13,670 (588) 13,082 11,312 (42) 11,270 Finance costs (2,020) - (2,020) (1,883) - (1,883) Profit before tax 11,650 (588) 11,062 9,429 (42) 9,387 Tax 3 (3,224) - (3,224) (2,638) - (2,638) Profit 8,426 (588) 7,838 6,791 (42) 6,749attributable toequityshareholders Earnings pershareBasic 4 20.0p (1.4p) 18.6p 17.0p (0.1p) 16.9p Diluted 4 19.1p (1.3p) 17.8p 16.6p (0.1p) 16.5p Dividend pershareInterim - 2.6p - 2.6p 2.4p - 2.4pproposed & paidFinal - proposed 4.6p - 4.6p 4.1p - 4.1p 7.2p - 7.2p 6.5p - 6.5p Paid 6.7p - 6.7p 6.1p - 6.1p Consolidated balance sheetAs at 30 June 2006 2006 2005 £'000 £'000Non-current assetsGoodwill 60,132 36,675Other intangible assets 7,910 985Property, plant and equipment 9,480 9,097Deferred tax assets 2,302 2,224 79,824 48,981 Current assetsWork in progress 30,966 28,772Trade and other receivables 52,554 39,505Tax recoverable 599 289Cash and cash equivalents 9,322 5,579 93,441 74,145 Current liabilitiesTrade and other payables (53,107) (44,356)Current tax liabilities (2,230) (1,561)Financial liabilities (6,092) (7,047) (61,429) (52,964) Net current assets 32,012 21,181 Non-current liabilitiesFinancial liabilities (32,068) (13,954)Retirement benefit obligation (4,251) (5,336)Deferred tax liabilities (164) (100) (36,483) (19,390) Net assets 75,353 50,772 Shareholders' equityShare capital 2,304 2,050Share premium account 51,332 33,554Cumulative translation reserve (432) (440)Retained earnings 22,149 15,608 Total shareholders' equity 75,353 50,772 Consolidated cash flow statementFor the year ended 30 June 2006 Note 2006 2005 £'000 £'000 Operating activities 5Cash generated from operations 9,375 12,756Interest paid (1,324) (1,557)Tax paid (3,575) (2,673) Net cash generated from operating activities 4,476 8,526 Investing activitiesProceeds on disposal of property, plant and equipment 250 196Purchases of property, plant and equipment (1,243) (1,989)Purchases of businesses (16,759) (1,521)Purchases of intangible assets (computer software) (1,072) (673)(Overdraft)/cash balances acquired with businesses (699) 143Dividends received - - Net cash used in investing activities (19,523) (3,844) Financing activitiesNet proceeds on issue of ordinary share capital 7,334 70Equity dividends paid (2,816) (2,423)Repayments of borrowings (6,084) (8,763)Drawdown of loan facilities 22,500 7,873Repayments of obligations under finance leases (2,950) (2,832) Net cash generated from/(used in) financing activities 17,984 (6,075) Net increase/(decrease) in cash and cash equivalents 2,937 (1,393) Cash and cash equivalents at beginning of year 3,108 4,501 Cash and cash equivalents at end of year 6,045 3,108 Consolidated statement of recognised income and expenseFor the year ended 30 June 2006 2006 2005 £'000 £'000 Profit attributable to equity shareholders 7,838 6,749 Net exchange adjustments offset in reserves net of tax 8 (440) Actuarial gains/(losses) on defined benefit pension schemes 768 (2,145) Tax on items taken directly to equity 29 863 Total recognised income and expense for the year 8,643 5,027 Consolidated statement of changes in shareholders' equityFor the year ended 30 June 2006 2006 2005 £'000 £'000 Profit for the year 7,838 6,749Exchange differences on translation of foreign operations 8 (440)Actuarial gains/(losses) on defined benefit pension schemes 768 (2,145)Share-based payments 722 433New share capital issued, net of expenses 18,032 2,933Tax on items taken directly to equity 29 863Equity dividends paid (2,816) (2,423) Net addition to shareholders' funds 24,581 5,970 Equity attributable to equity shareholders of the Company at beginning of 50,772 44,802year Equity attributable to equity shareholders of the Company at end of year 75,353 50,772 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 2006 will be dispatched toshareholders by 30 October 2005 for approval at the Annual General Meeting to beheld on 6 December 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. Segmental analysis Primary reporting format - business segments For management purposes, the Group is currently organised into three operatingunits - Engineering, Management Services and The Environment. These operatingunits are the basis on which the Group reports its primary segmentalinformation. Segmental information about these businesses is presented below. Engineering Management The Environment Group Services 2006 2006 2006 2006 £'000 £'000 £'000 £'000 RevenueExternal sales 80,092 53,937 40,106 174,135Inter-segment sales (4,805) (535) (1,308) (6,648) Total revenue 75,287 53,402 38,798 167,487 ResultOperating profit before amortisation of 4,612 4,711 4,347 13,670acquired intangiblesAmortisation of acquired intangibles (187) (252) (149) (588) Operating profit 4,425 4,459 4,198 13,082 Net finance costs (2,020) Profit before tax 11,062Tax (3,224) Profit for the year 7,838 2. Segmental analysis (continued) Engineering Management The Environment Group Services 2005 2005 2005 2005 £'000 £'000 £'000 £'000 RevenueExternal sales 71,954 47,255 29,337 148,546Inter-segment sales (3,861) (216) (563) (4,640) Total revenue 68,093 47,039 28,774 143,906 ResultOperating profit before amortisation of 4,085 4,089 3,138 11,312acquired intangiblesAmortisation of acquired intangibles - - (42) (42) Operating profit 4,085 4,089 3,096 11,270 Net finance costs (1,883) Profit before tax 9,387Tax (2,638) Profit for the year 6,749 3. Tax 2006 2005 £'000 £'000Current tax:UK corporation tax on profits for the year at 30% (2005: 30%) 2,498 2,544Adjustments in respect of previous years 56 (14) Overseas tax on profits for the year 676 190Adjustments in respect of previous years - 43 3,230 2,763 Deferred tax:Movement in deferred tax (6) (125) 3,224 2,638 Tax on items charged to equity:Deferred tax credit related to share based payments 259 220Deferred tax (charge)/credit related to the actuarial gains and losses on (230) 643retirement benefit schemes 29 863 4. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: 2006 2005 £'000 £'000Earnings for the purposes of basic and diluted earnings per share being profit for 7,838 6,749the yearAmortisation of acquired intangible assets 588 42 Earnings for the purposes of basic and diluted adjusted earnings per share 8,426 6,791 Number NumberNumber of sharesWeighted average number of shares for basic earnings per share 42,173,184 40,005,473 Effect of dilutive potential ordinary shares:Share options 456,456 345,987Shares to be issued in respect of acquisitions 1,374,844 564,489 Weighted average number of shares for diluted earnings per share 44,004,484 40,915,949 Earnings per shareBasic 18.6p 16.9pDiluted 17.8p 16.5p Adjusted earnings per shareBasic 20.0p 17.0pDiluted 19.1p 16.6p 5. Cash generated from operations 2006 2005 £'000 £'000 Profit from operations 13,082 11,270Adjustments for:Depreciation of property, plant and equipment 3,392 2,816Amortisation of intangible assets 1,177 594Loss on disposal of property, plant and equipment 136 96Share options charge 890 464 Operating cash flows before movements in working capital 18,677 15,240 Decrease/(increase) in inventories 237 (4,621)Increase in receivables (7,632) (4,742)(Increase)/decrease in payables (1,907) 6,879 Cash generated by operations 9,375 12,756 Income taxes paid (3,575) (2,673)Interest paid (1,324) (1,557) Net cash from operating activities 4,476 8,526 6. Analysis of changes in net financial liabilities At 1 July Cash Other non- At 30 June 2005 flows Acquisitions cash items 2006 £'000 £'000 £'000 £'000 £'000 Cash and cash equivalents 5,579 3,578 165 - 9,322Bank overdrafts (2,471) 58 (864) - (3,277)Bank loans due within one year (2,029) 2,029 - - -Bank loans due in after one year (10,811) (18,445) - (157) (29,413)Loan notes due within one year - - - (245) (245)Finance leases and hire purchase contracts (5,690) 2,950 (228) (2,257) (5,225) (15,422) (9,830) (927) (2,659) (28,838) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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