WYG Plc (LON:WYGR) faced a number of challenges in FY18 but ended the year with an improved market backdrop, higher divisional order books and benefits from management actions starting to come through. Guidance and our profit estimates are unchanged. With greater business stability and a focus on margins and cash generation (plus receding legacy issues) investors will be able to concentrate on the earnings recovery story. This may be partly discounted following a recent share price pick up, but in the context of historic earnings levels there is more to go for.
Profits down but in line with latest guidance
FY18 ended in line with revised guidance; while group revenue was flat y-o-y, EBIT declined by almost 60% with both divisions experiencing reductions for different reasons. In the event, the profit mix was more in favour of Consulting Services than we had anticipated, with improving top-line momentum in H2. A small tax credit benefitted EPS, although the y-o-y outturn was still significantly down while the DPS was maintained, as at the interim stage. Net debt rose by £3.8m to £6.3m (or 1.25x what should be trough EBITDA) affected by non-trading cash outflows.
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