Building momentum
FY14 results were slightly ahead of expectations raised through the year and this included the final dividend, ending a five-year zero payout. WYG Plc (LONDON:WYGR) is more clearly in growth mode – as reflected in raised FY16 estimates – with scope for this to build further. Order book and pipeline momentum is positive and can drive further earnings and share price progress.
All regions ahead year-on-year
Following a number of upgrades, WYG delivered EBIT of £4.8m, well ahead of the £4.1m level anticipated a year ago and £1.5m in FY13. The UK and Europe, Africa and Asia (EAA) regions provided this momentum. The largest year-on-year gain came from the UK (turning a small loss into a healthy profit), EAA saw a return to revenue growth and further profit progress, and the smaller Middle East, North Africa (MENA) operation grew profit despite lower revenues. WYG’s cash flow was also better than expected – due to a better debtor performance – with a £3.3m overall outflow after legacy and acquisition cash payments of c £4.8m in total. In a significant move, WYG returned to the dividend list (with a proposed 0.5p final).
Good prospects
All regions look to have good prospects most immediately with a more broadly based recovery in the UK and a significant new contract win in Libya boosting MENA. Momentum in EAA should also pick up from a more subdued year-end order position as contract awards from the latest EU aid programme (MFF 2014-20) and 2014 annual budget gather pace. Hence, the group is well placed at the start of FY15.Our current year PBT estimate is unchanged (staff investment offsetting rising revenue in the near term) although, subject to order intake, there may be scope for upward revisions in due course. Underlying momentum should become more apparent in FY16 (PBT estimate raised by c 8%, to +32% y-o-y) with FY17 showing further progress.
Valuation: Growth footing
After a positive reaction to the year-end update in March, WYG’s share price has tested new highs after completing its turnaround phase and moving onto a growth footing. At 115p, the current year P/E rating is 17.7x, falling to 13.5x one year further out. Including share-based payments (SBP) – consistent with sector peers – would push these multiples significantly higher due to the early stage of earnings recovery. That said, management is targeting a better FY16 outturn than shown above and, in FY17 (when SBP are less material) the premium to large peers is c 20%.
To Read the Entire Report Please Click on the pdf File Below