WYG
Written by
WYG |
Momentum across all three reporting regions |
FY16 results |
Industrial support services |
24 June 2016 |
Share price performance
Business description
Next events
Analysts
WYG is a research client of Edison Investment Research Limited |
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WYG hit our FY16 expectations and ended the year strongly. All three regions are now profitable and have positive trading momentum and order books coming into FY17. We have maintained our recently raised EPS estimates with a 13% CAGR now to FY19. We see upside bias if the company successfully converts a good level of pipeline opportunities.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/15 |
130.5 |
5.7 |
8.6 |
1.0 |
15.6 |
0.7 |
03/16 |
133.5 |
7.0 |
10.6 |
1.5 |
13.7 |
1.1 |
03/17e |
156.5 |
9.7 |
12.1 |
1.7 |
11.1 |
1.2 |
03/18e |
170.6 |
11.0 |
13.6 |
1.9 |
9.8 |
1.4 |
Note: *PBT and EPS FD are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY16 results in line: UK strong, overseas profitable
FY16 results matched our expectations with a c 34% increase in EBIT on a modestly higher revenue base. Finance costs were slightly better than anticipated and together with a small tax credit (we had assumed no charge), PBT and EPS came in slightly ahead, with DPS in line at 1.5p (up 50%). As trailed in our May update note, UK operations performed well throughout the year, finished with strong momentum and delivered a 10.7% EBIT margin (+150bp y-o-y); acquisitions contributed c £3m revenue and £1.1m EBIT (or around half of the margin uplift). After a slower start to the year the EAA and MENA regions gathered revenue momentum in H2 as EU funded project activity built back up and both moved into profit in H2 and for the full year. At group level, higher year end activity levels had an associated working capital build up, which together with acquisition cash outflow left WYG in a £0.2m net cash position at year end (versus £12.3m a year earlier).
Positive order book and pipeline prospects
At the end of FY16, we raised FY17 and FY18 estimates to reflect momentum in all three reporting regions which is set to continue. The Brexit result is not expected to significantly alter prospects. A record c £150m order book and an encouraging, visible pipeline – especially overseas – support confidence in further expected progress. For now, we have made no further EBIT estimate changes (but finance costs are slightly lower) and introduced FY19 estimates. Good conversion rates of international prospects into orders – especially relating to the causes and consequences of mass migration flows through Africa and Eastern Europe where there is funding urgency – could drive higher expectations later in the year.
Valuation: Multiples reduced by improving prospects
In the last six months, WYG’s share price has traded in the 125-140p range and is modestly down overall ytd. During this time, our FY17 and FY18 EPS estimates have risen by c 15% and 12%, respectively, through a combination of organic upgrades and the acquisition of Signet in January. As a result, WYG’s P/E rating is now 11.1x and 9.8x for this year and next – with a three-year PEG just above 1x – and corresponding EV/EBITDA multiples of 7.8x and 6.7x, respectively.
Financial summary
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
2019e |
||
Year end March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
IAS19R |
IAS19R |
IAS19R |
IAS19R |
IAS19R |
IAS19R |
IAS19R |
Revenue |
|
|
125.7 |
126.9 |
130.5 |
133.5 |
156.5 |
170.6 |
178.5 |
EBITDA |
|
|
3.3 |
6.4 |
7.2 |
9.0 |
12.0 |
13.4 |
14.2 |
Operating Profit (before GW and except.) |
1.5 |
4.8 |
5.4 |
7.2 |
10.0 |
11.3 |
12.0 |
||
Net Interest |
|
|
(0.8) |
(0.6) |
(0.1) |
(0.2) |
(0.3) |
(0.3) |
(0.3) |
JV / Associates |
|
|
0.0 |
0.0 |
0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
Intangible Amortisation |
|
|
(1.0) |
(1.2) |
(1.3) |
(1.5) |
(1.7) |
(1.7) |
(1.7) |
Other |
|
|
(2.5) |
(3.7) |
(2.9) |
(1.5) |
(1.5) |
(1.5) |
(1.5) |
Exceptionals |
|
|
(0.6) |
2.4 |
0.0 |
(1.8) |
0.0 |
0.0 |
0.0 |
Profit Before Tax (norm) |
|
|
0.7 |
4.3 |
5.7 |
7.0 |
9.7 |
11.0 |
11.7 |
Profit Before Tax (FRS 3) |
|
|
(3.3) |
1.8 |
1.4 |
2.2 |
6.5 |
7.8 |
8.5 |
Tax |
|
|
(0.1) |
0.3 |
0.5 |
0.6 |
(0.8) |
(0.9) |
(1.0) |
Minorities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Profit After Tax (norm) |
|
|
0.7 |
4.5 |
6.2 |
7.6 |
8.9 |
10.1 |
10.7 |
Profit After Tax (FRS 3) |
|
|
(3.4) |
2.1 |
1.9 |
2.8 |
5.7 |
6.9 |
7.5 |
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
64.5 |
64.6 |
65.8 |
70.6 |
68.4 |
68.4 |
68.4 |
|
EPS - normalised fully diluted (p) |
|
|
0.8 |
6.4 |
8.6 |
10.6 |
12.1 |
13.6 |
14.4 |
EPS - FRS 3 (p) |
|
|
(5.2) |
3.2 |
2.9 |
4.0 |
8.4 |
10.1 |
10.9 |
Dividend per share (p) |
|
|
0.0 |
0.5 |
1.0 |
1.5 |
1.7 |
1.9 |
2.0 |
|
|
|
|
|
|
|
|
|
|
EBITDA Margin (%) |
|
|
2.6 |
5.1 |
5.5 |
6.8 |
7.7 |
7.9 |
8.0 |
Operating Margin (before GW and except.) (%) |
1.2 |
3.8 |
4.1 |
5.4 |
6.4 |
6.6 |
6.7 |
||
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
18.6 |
19.8 |
22.0 |
32.3 |
34.5 |
34.1 |
32.5 |
Intangible Assets |
|
|
16.3 |
17.6 |
18.7 |
27.5 |
28.7 |
27.4 |
25.7 |
Tangible Assets |
|
|
2.4 |
2.2 |
2.3 |
3.2 |
4.2 |
5.0 |
5.2 |
Investments |
|
|
0.0 |
0.0 |
0.9 |
1.6 |
1.6 |
1.6 |
1.6 |
Current Assets |
|
|
66.8 |
60.0 |
54.6 |
62.5 |
62.4 |
69.0 |
78.0 |
Stocks |
|
|
20.2 |
21.6 |
21.1 |
30.4 |
31.4 |
31.6 |
32.9 |
Debtors |
|
|
23.0 |
18.5 |
18.5 |
21.1 |
21.7 |
23.6 |
24.7 |
Cash |
|
|
19.597 |
15.9 |
12.3 |
8.2 |
6.5 |
10.9 |
17.6 |
Current Liabilities |
|
|
(45.7) |
(42.9) |
(40.8) |
(50.7) |
(50.9) |
(53.5) |
(55.7) |
Creditors |
|
|
(44.8) |
(42.3) |
(40.8) |
(47.6) |
(50.9) |
(53.5) |
(55.7) |
Short term borrowings |
|
|
(0.953) |
(0.7) |
0.0 |
(3.1) |
0.0 |
0.0 |
0.0 |
Long Term Liabilities |
|
|
(23.3) |
(16.9) |
(13.2) |
(15.8) |
(13.0) |
(10.8) |
(9.9) |
Long term borrowings |
|
|
0.0 |
0.0 |
0.0 |
(5.0) |
(5.0) |
(5.0) |
(5.0) |
Other long term liabilities |
|
|
(23.3) |
(16.9) |
(13.2) |
(10.8) |
(8.0) |
(5.8) |
(4.9) |
Net Assets |
|
|
16.4 |
20.1 |
22.5 |
28.3 |
33.0 |
38.7 |
44.9 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
(2.6) |
(0.1) |
2.4 |
(1.0) |
9.2 |
10.1 |
11.5 |
Net Interest |
|
|
(0.8) |
(0.5) |
(0.1) |
(0.2) |
(0.3) |
(0.3) |
(0.3) |
Tax |
|
|
(0.2) |
(0.0) |
(0.3) |
(0.3) |
(0.9) |
(0.8) |
(0.9) |
Capex |
|
|
(1.3) |
(1.4) |
(1.7) |
(2.5) |
(2.9) |
(2.9) |
(2.4) |
Acquisitions/disposals |
|
|
(0.8) |
(1.4) |
(1.6) |
(7.9) |
(2.7) |
(0.5) |
0.0 |
Financing |
|
|
(0.0) |
0.0 |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
Dividends |
|
|
0.0 |
0.0 |
(0.5) |
(0.8) |
(1.1) |
(1.1) |
(1.3) |
Net Cash Flow |
|
|
(5.6) |
(3.3) |
(2.0) |
(12.6) |
1.3 |
4.5 |
6.7 |
Opening net debt/(cash) |
|
|
(23.0) |
(18.6) |
(15.2) |
(12.3) |
(0.2) |
(1.5) |
(5.9) |
HP finance leases initiated |
|
|
(0.0) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
|
|
1.3 |
(0.2) |
(0.9) |
0.5 |
0.0 |
0.0 |
0.0 |
Closing net debt/(cash) |
|
|
(18.6) |
(15.2) |
(12.3) |
(0.2) |
(1.5) |
(5.9) |
(12.6) |
Source: WYG accounts, Edison Investment Research
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