Listed firm issues profit warning after being impacted by ‘cautious business sentiment’ and political uncertainty

Leeds-headquartered international professional services company, WYG, has warned it expects its operating profit to be “materially below current market expectations” after its UK markets have been impacted by current cautious business sentiment and political uncertainty.   

Issuing a trading update for the year ending 31 March 2019, WYG said that while its revenue and net debt were expected to be similar to the prior year it would not meet EBITDA expectations for the year – leading to the firm seeking to secure a deferral or waiver of covenants with its lender. Its share price plummeted 40% on the back of the announcement. 

WYG said that while it expects a higher proportion of Group revenues to be generated from its International Development business, its UK business was impacted by the current cautious business sentiment and political uncertainty. It added that Consultancy Services were seeing some delays in investment decisions regarding new work, as well as the deferral of activity on certain existing projects, across both the public and private sectors. 

WYG added: “As a result, we think it necessary to take a more cautious view as to the likely outturn for our UK business for the year such that we no longer expect to see the marked increase in our UK activity that has been typical of the final quarter of our financial year in the past.”

The firm said it anticipated a second half operating profit performance which is below that achieved in the first half, implying an operating profit for the year as a whole which is materially below current market expectations.

The firm said it was seeing a “steady improvement” in the conversion of its International Development pipeline into profitable work, with revenues anticipated to be slightly ahead of previous expectations. WYG added: “However, the business’s margins remain lower than those of our mainly UK focussed Consultancy Services business as we continue to incur high bidding costs ahead of building revenues. In Turkey and Africa, we have a good order book of new work to be delivered in the next 12 months and our wider pipeline of future prospects continues to build healthily.”

WYG said: “As a result, we expect that we will not meet either of the net debt to EBITDA or interest cover covenants within our facility agreements for 31 March 2019 and we have opened discussions with our lending bank with a view to securing a deferral or waiver of the relevant covenant tests.  We already have a number of clearly defined actions underway in order to materially reduce our net debt position. Subject to the timing of some larger trading receipts within our International Development business, we expect year end net debt to be in line with previous market expectations at around £10m.”

 Douglas McCormick, Chief Executive Officer of WYG, said: “While it is disappointing to be revising expectations today, subdued domestic economic conditions and the headwind from political uncertainty is affecting many businesses’ willingness to commit to major new projects. This has particularly affected the construction sector which underpins much of our business in the UK.”

“Our strategy of developing a simpler, more robust platform and driving efficiencies continues. I am confident that the actions we are taking will improve the longer term prospects of the business and we will look to accelerate these actions to mitigate against the impact of an unusually difficult final quarter in the current uncertain macro-economic environment.”

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