WYG
Written by
WYG |
Another UK deal sealed |
UK acquisition |
Industrial support services |
8 January 2016 |
Share price performance
Business description
Next events
Analysts
WYG is a research client of Edison Investment Research Limited |
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Signet Planning is WYG’s third UK acquisition in FY16, adding to company momentum in good sector conditions. It enhances WYG’s regional planning consulting network and also strengthens its presence in other areas. On our estimates, the deal enhances FY17 and FY18 fully diluted EPS by over 8% in each year. On top of existing growth expectations, this brings WYG’s valuation multiples down rapidly over our estimate horizon.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
126.9 |
4.3 |
6.4 |
0.5 |
21.8 |
0.4 |
03/15 |
130.5 |
5.7 |
8.6 |
1.0 |
16.2 |
0.7 |
03/16e |
134.7 |
6.9 |
8.8 |
1.5 |
15.9 |
1.1 |
03/17e |
155.5 |
8.9 |
11.3 |
1.7 |
12.3 |
1.2 |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
Complementary and additive fit
Signet Planning is a front-end UK town planning and urban design consultancy based in Harrogate, with four other offices (in Newcastle, London, Nottingham and Manchester). It fits well with WYG’s existing regional footprint in these disciplines, especially on residential projects, strengthens the group’s position in the London Commercial segment and enhances scope to take on work related to the UK government Northern Powerhouse agenda (an area highlighted in the recent H1 results announcement). In the year to March 2015, Signet reported turnover and PBT of £3.7m and £0.7m respectively and is understood to be in an ongoing growth phase.
Reasonable multiples, earnings enhanced
WYG is paying an initial cash consideration of £3.5m, with a further potential £0.235m payable in a year’s time subject to the satisfactory development of existing work in progress and debtor collection. Consequently, acquisition multiples look to be in the order of 1x revenue and c 6x EBITDA. Reflecting this transaction, we have increased our estimates for FY17 and FY18 by over 8%. Over the last year, our FY17 group estimates have now risen by c 15% driven by a combination of organic growth in the UK – which has more than offset short-term softness in overseas order intake – and the three acquisitions here during the period. Hence, visible progress is being made towards management’s stated target of achieving £15m PBT in FY18.
Valuation: Strong growth expected
On revised estimates, the three-year fully diluted EPS CAGR to FY18 is almost 15% now and the trailing P/E of 16.2x reduces rapidly to 10.7x at the end of this period. At the same time, the corresponding EV/EBITDA multiples move from 12.9x down to 7.3x. While WYG’s share price has risen by almost 40% over the last 12 months, we feel the current rating is still reasonable. Good business momentum and management’s FY18 target both suggest a positive bias towards further upgrades in due course.
Exhibit 1: Financial summary
£'ms |
2013 |
2014 |
2015 |
2016e |
2017e |
2018e |
||
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
IAS19R |
IAS19R |
IAS19R |
IAS19R |
IAS19R |
IAS19R |
Revenue |
|
|
125.7 |
126.9 |
130.5 |
134.7 |
155.5 |
168.6 |
EBITDA |
|
|
3.3 |
6.4 |
7.2 |
9.0 |
11.2 |
12.7 |
Operating Profit (before GW and except.) |
1.5 |
4.8 |
5.4 |
7.2 |
9.4 |
10.9 |
||
Net Interest |
|
|
(0.8) |
(0.6) |
(0.1) |
(0.3) |
(0.5) |
(0.6) |
JV / Associates |
|
|
0.0 |
0.0 |
0.4 |
0.0 |
0.0 |
0.0 |
Intangible Amortisation |
|
|
(1.0) |
(1.2) |
(1.3) |
(1.5) |
(1.5) |
(1.5) |
Other |
|
|
(2.5) |
(3.7) |
(2.9) |
(1.0) |
(1.0) |
(1.0) |
Exceptionals |
|
|
(0.6) |
2.4 |
0.0 |
1.3 |
0.0 |
0.0 |
Profit Before Tax (norm) |
|
|
0.7 |
4.3 |
5.7 |
6.9 |
8.9 |
10.3 |
Profit Before Tax (FRS 3) |
|
|
(3.3) |
1.8 |
1.4 |
5.7 |
6.4 |
7.8 |
Tax |
|
|
(0.1) |
0.3 |
0.5 |
(0.7) |
(0.8) |
(0.9) |
Minorities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Profit After Tax (norm) |
|
|
0.7 |
4.5 |
6.2 |
6.3 |
8.1 |
9.4 |
Profit After Tax (FRS 3) |
|
|
(3.4) |
2.1 |
1.9 |
5.0 |
5.6 |
6.9 |
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
64.5 |
64.6 |
65.8 |
69.8 |
68.4 |
68.4 |
|
EPS - normalised fully diluted (p) |
|
|
0.8 |
6.4 |
8.6 |
8.8 |
11.3 |
13.1 |
EPS - FRS 3 (p) |
|
|
(5.2) |
3.2 |
2.9 |
7.2 |
8.2 |
10.1 |
Dividend per share (p) |
|
|
0.0 |
0.5 |
1.0 |
1.5 |
1.7 |
1.9 |
|
|
|
|
|
|
|
|
|
EBITDA Margin (%) |
|
|
2.6 |
5.1 |
5.5 |
6.7 |
7.2 |
7.5 |
Operating Margin (before GW and except.) (%) |
1.2 |
3.8 |
4.1 |
5.4 |
6.1 |
6.5 |
||
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
18.6 |
19.8 |
22.0 |
27.9 |
30.4 |
30.4 |
Intangible Assets |
|
|
16.3 |
17.6 |
18.7 |
23.3 |
24.6 |
23.4 |
Tangible Assets |
|
|
2.4 |
2.2 |
2.3 |
3.8 |
5.0 |
6.1 |
Investments |
|
|
0.0 |
0.0 |
0.9 |
0.8 |
0.8 |
0.8 |
Current Assets |
|
|
66.8 |
60.0 |
54.6 |
52.6 |
55.8 |
62.5 |
Stocks |
|
|
20.2 |
21.6 |
21.1 |
21.0 |
24.3 |
26.3 |
Debtors |
|
|
23.0 |
18.5 |
18.5 |
23.1 |
23.6 |
25.6 |
Cash |
|
|
19.597 |
15.9 |
12.3 |
4.4 |
3.8 |
6.5 |
Current Liabilities |
|
|
(45.7) |
(42.9) |
(40.8) |
(42.6) |
(46.9) |
(50.4) |
Creditors |
|
|
(44.8) |
(42.3) |
(40.8) |
(42.6) |
(46.9) |
(50.4) |
Short term borrowings |
|
|
(0.953) |
(0.7) |
0.0 |
0.0 |
0.0 |
0.0 |
Long Term Liabilities |
|
|
(23.3) |
(16.9) |
(13.2) |
(10.0) |
(6.9) |
(4.4) |
Long term borrowings |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other long term liabilities |
|
|
(23.3) |
(16.9) |
(13.2) |
(10.0) |
(6.9) |
(4.4) |
Net Assets |
|
|
16.4 |
20.1 |
22.5 |
27.8 |
32.3 |
38.1 |
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
(2.6) |
(0.1) |
2.4 |
4.4 |
7.2 |
8.5 |
Net Interest |
|
|
(0.8) |
(0.5) |
(0.1) |
(0.3) |
(0.5) |
(0.6) |
Tax |
|
|
(0.2) |
(0.0) |
(0.3) |
(1.0) |
(0.7) |
(0.8) |
Capex |
|
|
(1.3) |
(1.4) |
(1.7) |
(1.8) |
(2.8) |
(2.8) |
Acquisitions/disposals |
|
|
(0.8) |
(1.4) |
(1.6) |
(8.5) |
(2.7) |
(0.5) |
Financing |
|
|
(0.0) |
0.0 |
(0.2) |
0.0 |
(0.0) |
0.0 |
Dividends |
|
|
0.0 |
0.0 |
(0.5) |
(0.8) |
(1.1) |
(1.1) |
Net Cash Flow |
|
|
(5.6) |
(3.3) |
(2.0) |
(8.0) |
(0.6) |
2.7 |
Opening net debt/(cash) |
|
|
(23.0) |
(18.6) |
(15.2) |
(12.3) |
(4.4) |
(3.8) |
HP finance leases initiated |
|
|
(0.0) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
|
|
1.3 |
(0.2) |
(0.9) |
0.1 |
0.0 |
(0.0) |
Closing net debt/(cash) |
|
|
(18.6) |
(15.2) |
(12.3) |
(4.4) |
(3.8) |
(6.5) |
Source: Company accounts, Edison Investment Research
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