29 Nov 2012 07:00
29 November 2012
WYG plc ("WYG" or the "Group")
Half Year Report
A return to operating profit
WYG plc, the global project management and technical consultancy, announces its half year results for the six months to 30 September 2012.
Financial overview:
·; Revenue of £61.8m (H1 2011: £68.5m)
·; Operating profit* of £0.3m (H1 2011: loss of £2.5m)
·; Adjusted* loss per share of 0.8p (H1 2011: 4.3p loss)
·; Unrestricted cash as at 30 September 2012 £12.7m (31 March 2012: £16.4m)
·; Orderbook as at 30 September 2012 £124.1m (30 September 2011: £144.8m)
*Before separately disclosed items
Key points:
·; Return to operating profit
·; Overall trading performance in line with the Board's expectations
·; International sales accounted for 39% of Group revenue (H1 2011: 40%)
·; Revenue and orderbook reflect planned reduction in certain markets
·; Progress in reducing legacy costs continues ahead of expectations; closure of loss making business in Republic of Ireland saving €5m in future support
·; Cash position at 30 September 2012 ahead of the Board's expectations
Current Trading & Outlook:
·; Trading since the half year end in line with expectations
·; Market conditions remain challenging in the UK albeit we see good opportunities in our key sectors of Defence & Justice and Energy & Waste
·; International opportunities in donor-funded and other markets offer good prospects for international growth
·; Orderbook £124.1m of which the UK accounts for £54.4m and £69.7m is International
Paul Hamer, Chief Executive Officer of WYG, said:
"As we guided earlier in the year, I am delighted to confirm that WYG has made an operating profit in the six month period ended 30 September 2012, marking a very significant milestone in the turnaround of the Group.
"Despite continued challenging conditions in the UK, we have secured good quality new business across our key sectors and we are developing a strong pipeline of international opportunities in both the public and private sectors, underpinning the Group's long term growth prospects.
"Trading in the first half, and since the period end, has been in line with our own expectations and market forecasts for the full year. We look forward to making further progress as we realise the benefits of legacy cost savings and focus on creating higher quality revenues through the delivery of our Global Integrated Strategy."
For further information, please contact:
WYG plc Tel: 0113 278 7111
Paul Hamer, Chief Executive Officer
Sean Cummins, Group Finance Director
MHP Communications Tel: 020 3128 8100
John Olsen
Katie Hunt
James White
Vicky Watkins
Numis Securities Limited Tel: 020 7260 1000
Stuart Skinner (Nominated Adviser)
David Poutney (Corporate Broker)
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that WYG has made an operating profit in the six month period ended 30 September 2012, marking a very significant milestone in the turnaround of the Group. WYG's overall trading performance in the first half of the current financial year has been in line with the Board's expectations - recognising the continuing challenges of doing business in our key markets in the UK and the positive effects of our progress in diversifying into international markets. The strengthening of the Company's balance sheet and our significant net cash balances have benefitted the Group's trading subsidiaries which can now bid with greater confidence of a positive outcome on projects where, until recently, the Group's financial covenant was often a barrier to winning new contracts.
During September, the Group's four trading companies in the Republic of Ireland were placed into liquidation. This business, which was built up through a series of 12 acquisitions between 1999 and 2008, had experienced extremely challenging trading conditions in recent years as a result of the wider economic conditions in Ireland and the severe decline in the Irish construction market. Its trading underperformance was exacerbated by the unsustainable property costs and the legacy of claims mainly associated with the companies prior to acquisition.
The directors of WYG estimate that the future legacy costs, primarily property-related, of supporting the Irish Business would have been at least €5 million and intend that these sums will now be redirected towards underpinning the growth initiatives of the wider business.
The Group's subsidiaries in Northern Ireland, which remain part of the Group (having been purchased from the liquidator for a nominal sum), have continued to trade profitably and are unaffected by the property issues that have impacted the business in the Republic of Ireland.
We continue to make very good progress reducing the other legacy costs relating to historical issues arising from the poor professional indemnity insurance history and the sub-optimal property portfolio from which WYG operates in the UK.
Cash management remains a very high priority and the Group's unrestricted cash position at 30 September 2012 at £12.7m (31 March 2012: £16.4m) was ahead of the Board's expectations.
With a robust financial platform, the benefits of our programme of 'self help' measures starting to flow through and a clearly defined strategy, the Board believes that the Group is now well placed to progress with the shift in focus from internal improvements to creating higher quality revenues through the delivery of our Global Integrated Strategy.
Senior appointments
I am pleased to announce that Glen Thorn, who joined us in March as Managing Director of the Buildings & Infrastructure business, has been appointed to lead the whole of the UK Region. Formerly Executive Director of Halcrow's Transportation Business Group Worldwide, Glen's priority will be to strengthen WYG's offering in our chosen markets and to drive growth. Also joining us, on 1 November as Group HR Director, is Karen Brookes. Karen comes to WYG from the Government Procurement Service and she will be focussing, among other things, on enhancing talent development, recruitment and retention processes throughout the Group working closely with the senior management team to ensure the successful execution of our growth initiatives. With new appointments generally, we have continued to see an improvement in the number and quality of responses we receive for advertised positions.
Strategy
Our Global Integrated Strategy is to focus on:
·; Enhancing our competitive client offering - delivering the best possible service and value to our clients. We continually review our operations so as to maximise our competitive offering to the market. By engaging with clients at an early stage of their projects we are able to deliver added value over the lifetime of the project.
·; Creating growth - directing our resources to attractive market sectors and geographies where we have or can achieve leading positions. The seven core market sectors we serve are: Defence & Justice, Energy & Waste, Environment (including water and waste water), Transport, Mining & Minerals, Urban & Commercial Development, and Social Development & Infrastructure.
·; Delivering global projects though greater internal and external collaboration - ensuring we make best use of our Group-wide resources. This approach is complemented by establishing and developing strategic partnerships and collaborations with third parties.
Results
Gross revenue reduced to £61.8m (2011: £68.5m). Net revenue attributable to in-house services, after deducting revenue attributable to third parties on which the Group does not make a margin, was £54.7 (2011: £61.3m).
Revenue in the UK is down to £32.0m (2011: £35.1m), largely as a result of the declining business in the Republic of Ireland prior to its closure five months into the period, and the restructuring of our Transport business. Excluding these factors, the continuing UK business was pleased to report modest growth. As expected, revenues are flat or slightly down in each of the Group's key overseas markets. However, this has delivered improved margins as we place less reliance on traditional EU donor funded work and direct our efforts to diversifying the overall portfolio of international work towards other donor providers and private sector work. We have also generated improved margins across the Group as a result of the better project and commercial disciplines introduced over the past two years and the reshaping of the Group's asset base.
The Group made an operating profit before separately disclosed items of £0.3m (2011: loss of £2.5m). On a statutory basis, the Group made a loss before tax of £0.7m (2011: profit of £40.3m) - the comparable period in the prior year was impacted by the separately disclosed items in that period.
Earnings per share adjusted to exclude separately disclosed items was a loss of 0.8p (2011: loss of 4.3p).
The Group closed the period with net cash at 30 September 2012 of £16.0m (31 March 2012: £23.1m) and unrestricted cash at £12.7m (31 March 2012: £16.4m). Net cash used in operations was £5.9m (2011: £21.6m). The Group continues to develop a culture which stresses the importance of cash generation and the effective management of working capital.
Total Group headcount reduced slightly during the period, mainly as a result of the closure of the business in the Republic of Ireland, closing on 30 September 2012 at 1,282 (31 March 2012: 1,325).
Dividend
As previously reported, the Board intends to invest its cash resources in the future growth opportunities available and does not expect to pay a dividend in the near future.
Outlook
Whilst trading conditions in the UK remain subdued, we are winning work in the Defence & Justice sector where we have a strong historical position, and Energy and Waste, where we have invested in increasing our skills and capacity in specialist areas such as nuclear decommissioning. Internationally, we are making progress in shifting the mix away from donor funded work in Eastern Europe and Turkey with some excellent local, private sector prospects and we are winning some significant projects in the Rest of the World.
The Board believes that the Group is now well placed to progress with the shift in focus from internal improvements to creating higher quality revenues through the delivery of our Global Integrated Strategy.Overall, in the coming years we expect to see the international business continuing to increase as a proportion of the business as a whole and are of the opinion that the prospects over the medium to long term are good.
In the near term, trading in the first half and since the period end has been in line with our own expectations and market forecasts for the full year. We look forward to making further progress as we realisethe benefits of legacy cost savings and focus on creating higher quality revenues through the delivery of our Global Integrated Strategy.
Mike McTighe, Non Executive Chairman
29 November 2012
BUSINESS REVIEW
Operationally, the Group is structured, and reports, on a regional basis with the four regions being:
1. UK
2. Eastern Europe (which includes CIS and Western Balkans)
3. MENA (Middle East & North Africa including Turkey)
4. Rest of the World - focussed on the international donor-funded market
UK (60.9% of Group Revenue)
The UK region generated net revenue of £32.1m (2011: £35.1m) with an operating loss before separately disclosed items of £0.7m (2011: loss of £3.3m).
Whilst the UK continues to be difficult, our energy market position has strengthened tremendously this year especially in the areas of renewable advice and waste to energy opportunities. One recent success is a major framework to provide strategic maintenance to Sellafield's Decommissioning Directorate covering the complete portfolio of assets for civil, structural, mechanical and electrical systems.
In the Transport sector, design work on the widening of the A453 around Nottingham is at its most intense prior to site works starting in early 2013 but elsewhere the Transport market remains flat, despite recent political support signalling an increase in future activity when funding plans materialise.
The Defence sector remains attractive with more opportunities emerging for the second half of the year. Work in support of the Defence Infrastructure Organisation (DIO) continues on a number of major projects including in Afghanistan where activity is ramping up and we now have a dedicated team of 13 working in and out of Camp Bastion alongside the Royal Engineers as part of the Civilian Engineering Support Team. Education and Health sectors remain strong: we are now heavily occupied providing a wide range of services on the 350 acre Desertcreat Joint Public Services College project in Northern Ireland, whichwill provide an integrated practical training and educational facility serving the joint public services community.
We continue to exploit pockets of very busy activity in the Planning arena, particularly in the residential market. The Retail sector also remains steady but public sector work continues to be constrained by limited client funds.
Among a number of awards in the UK business, our Civil and Structural Engineers in Manchester received the award for the best large project in the North-West from the Lancashire and Cheshire Branch of the Institution of Structural Engineers for their work on Manchester Metropolitan University's new Business School and Student Hub and Neil Smith, Regional Director at WYG, has been awarded the CIBSE Low Carbon Consultant of the Year award for 2012/13.
Eastern Europe (26.1% of Group Revenue)
Our business in Eastern Europe is run through subsidiaries in Poland, Romania, Bulgaria, Croatia and Russia, operating a region-wide network of offices. During this period net revenue of £15.1m (2011: £18.9m) was achieved, with an operating profit before separately disclosed items of £0.5m (2011: £0.6m).
Most of our operations in the region continued to be focused on the Social Development & Infrastructure Sector and are involved in high-level work for various national governments and public authorities throughout the Western Balkans as well as in Poland, Bulgaria and Romania. In Poland we maintained our position as a leading national provider of strategic and business advisory services and we are a lead adviser/independent evaluator to the Polish government on publicly financed development programmes.
Through our network of Western Balkan offices we continued to deliverthe EC funded Infrastructure Projects Facility (IPF1 and IPF2), and in July we announced our participation on the third stage of that massive programme, in joint venture with Mott Macdonald and Atkins.
In the CIS we provide consultancy services in the Mining, Metals & Minerals sector (these operations run through a collaborative joint venture), as well as selected engineering and related services including retail development and upgrading of railway stations.
Generally in Eastern Europe, the end of the current seven year international donor funding cycle is starting to make its presence felt. We have anticipated this by seeking to change the mix of work to include more local consultancy-based activity. We have some exciting prospects coming through and are making reasonable progress in rebuilding the orderbook in this region, although the type and volume of projects is less predictable than before. We will be seeking to build on our progress to date as we extend the full WYG service offering more widely throughout the Region, especially in the private sector.
MENA (11.6% of Group Revenue)
The MENA Region (which includes Turkey) contributed revenue of £6.7m (2011: £6.7m) with an operating profit before separately disclosed items of £0.3m (2011: £0.2m).
In Turkey, we continue to lead a number of major framework contracts and we have won a number of significant new projects. The IT function has re-branded as WYG IT Solutions and has moved to a free tax zone in the Techno Park, from which it not only provides support to the wider business but also functions as a profit centre in its own right.
We have opened a new office in Istanbul and our first private sector project with Foot Locker started there in September 2012. The team continues to be the country's market leader in the provision of consultancy services on donor-funded projects in the Social Development & Infrastructure sector. We are also seeing increasing demand for our technical services and we are heavily engaged as project managers and design teams in the delivery of two major projects to provide waste water treatment plants in Siverek and Ordu.
During the period we have provided support for the development of regional operations in the Middle East and North Africa from our regional headquarters in Ankara, Turkey. We have established a presence in both Dubai and Doha where we now have collaborative partnerships with local organisations as a result of which we expect to convert a number of opportunities into significant workstreams. Further afield, we have won projects in Pakistan and Nigeria.
The MENA Region remains a high priority for the Group. We have made considerable progress over the past six months in diversifying the range of services we offer by reducing our dependence on donor-funded work and moving into the private and public sectors where we believe there is a strong market for our core services. Our credentials in the region place us well to win further major projects in the Middle East in the coming months and these will provide an excellent platform from which to secure further work. In the meantime, we continue to place a very heavy emphasis on tight cost controls throughout the Region.
Rest of the World (1.4% of Group revenue)
In the Rest of the World - where we are predominantly focused on the donor funded market - we generated revenue of £0.8m (2011: £0.7m) with an operating profit before separately disclosed items of £0.1m (2011: loss of £0.1m).
During the past four years, we have significantly increased our portfolio of public financial management (PFM) projects with funding from the Asian Development Bank, the UK's Department for International Development, European Bank for Reconstruction and Development, EU and World Bank.
In the field of Social Development & Infrastructure, we are working in partnership with IPA Economics (UK) and CID Consulting (Egypt) to transform the Egyptian water sector by making utilities more efficient. We are undertaking similar but smaller projects with Safege in Lesotho.
Our strategic aim to diversify our client base in the international donor market was boosted by our inclusion in the Public Sector Governance and PFM frameworks, the PEAKS (Professional Evidence and Applied Knowledge Services) framework and GEFA (Global Evaluation Framework Agreement). We have also secured a number of major contract extensions, notably a two year extension to our work to strengthen trading relations between the European Union and South Africa.
Unaudited consolidated income statement
For the six months ended 30 September 2012
Six months ended 30 September 2012 | Six months ended 30 September 2011 | Year ended 31 March 2012 | ||
Note | £'000 | £'000 | £'000 | |
Continuing operations | ||||
Revenue | 4 | 61,756 | 68,487 | 139,864 |
Operating expenses | (61,822) | (28,173) | (125,647) | |
Operating (loss)/profit* | (66) | 40,314 | 14,217 | |
Finance costs | 6 | (679) | (1,603) | (2,339) |
(Loss)/profit before tax | (745) | 38,711 | 11,878 | |
Tax charge | 7 | (101) | (323) | (490) |
(Loss)/profit attributable to equity shareholders | (846) | 38,388 | 11,388 | |
(Loss)/earnings per share | 8 | |||
Basic | (1.3p) | 36.5p | 13.4p | |
Diluted | (1.3p) | 34.2p | 11.8p |
* Operating (loss)/profit includes a number of items, some previously described as exceptional, that are separately disclosed in note 4.
The accompanying notes to the interim results are an integral part of this consolidated income statement.
Unaudited consolidated statement of comprehensive income
For the six months ended 30 September 2012
| Six months ended 30 September 2012 | Six months ended 30 September 2011 | Year to 31 March 2012 | |
£'000 | £'000 | £'000 | ||
(Loss)/profit for the period attributable to equity shareholders | (846) | 38,388 | 11,388 | |
Other comprehensive (expense)/income: | ||||
Net exchange adjustments offset in reserves net of tax | (576) | 240 | (811) | |
Actuarial movements on defined benefit pension scheme | - | - | (340) | |
Tax on items taken directly to equity | - | - | 153 | |
Other comprehensive (expense)/income for the period | (576) | 240 | (998) | |
Total comprehensive (expense)/income for the period | (1,422) | 38,628 | 10,390 |
Unaudited consolidated balance sheet
As at 30 September 2012
|
| As at 30 September 2012 | As at 30 September 2011 | As at 31 March 2012 |
Note | £'000 | £'000 | £'000 | |
Non-current assets | ||||
Goodwill | 10 | 11,645 | 26,445 | 11,645 |
Other intangible assets | 11 | 5,283 | 6,151 | 5,708 |
Property, plant and equipment | 11 | 2,817 | 2,849 | 3,206 |
Deferred tax assets | 327 | 96 | 422 | |
20,072 | 35,541 | 20,981 | ||
Current assets | ||||
Work in progress | 12 | 21,546 | 29,006 | 27,066 |
Trade and other receivables | 13 | 26,636 | 27,166 | 28,589 |
Tax recoverable | 92 | 305 | 815 | |
Cash and cash equivalents | 15,963 | 30,119 | 24,280 | |
64,237 | 86,596 | 80,750 | ||
Current liabilities | ||||
Trade and other payables | (42,549) | (48,128) | (50,984) | |
Current tax liabilities | (528) | (513) | (613) | |
Financial liabilities | 14 | (18) | (898) | (1,156) |
(43,095) | (49,539) | (52,753) | ||
Net current assets | 21,142 | 37,057 | 27,997 | |
Non-current liabilities | ||||
Financial liabilities | 14 | (72) | (121) | (95) |
Retirement benefit obligation | (3,474) | (2,815) | (2,770) | |
Deferred tax liabilities | (1,957) | (2,072) | (2,052) | |
Provisions, liabilities and other charges | 15 | (18,051) | (21,886) | (26,099) |
(23,554) | (26,894) | (31,016) | ||
Net assets | 17,660 | 45,704 | 17,962 | |
Shareholders' equity | ||||
Share capital | 70 | 70 | 70 | |
Share premium account | - | 123,674 | - | |
Capital redemption reserve | - | 35,646 | - | |
Merger reserve | - | 6,284 | - | |
Hedging and translation reserve | 1,610 | 3,237 | 2,186 | |
Retained earnings | 15,980 | (123,207) | 15,706 | |
Total shareholders' equity | 17,660 | 45,704 | 17,962 |
Unaudited consolidated statement of changes in shareholders' equity
For the six months ended 30 September 2012
| Share capital | Share premium |
Capital Redemption Reserve | Merger reserve | Hedging and translation reserve | Retained earnings | Total |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance as at 1 April 2011 | 35,648 | 42,214 | - | 6,284 | 2,997 | (113,763) | (26,620) |
Profit for the period | - | - | - | - | - | 38,388 | 38,388 |
Other comprehensive income: | |||||||
Currency translation differences | - | - | - | - | 240 | - | 240 |
Other comprehensive income for the period | - | - |
- | - | 240 | - | 240 |
Total comprehensive income for the period | - | - | - | - | 240 | 38,388 | 38,628 |
Share based payments | - | - | - | - | 1,847 | 1,847 | |
Issue of share capital | 68 | 31,781 | - | - | - | - | 31,849 |
Transfers * | (35,646) | 49,679 | 35,646 | - | - | (49,679) | - |
Balance at 30 September 2011 | 70 | 123,674 | 35,646 | 6,284 | 3,237 | (123,207) | 45,704 |
* Details of the transfers are disclosed in note 22 of the WYG plc Annual Report and Accounts for the year ended 31 March 2012.
Unaudited consolidated statement of changes in shareholders' equity (continued)
For the six months ended 30 September 2012
| Share capital | Share premium |
Capital Redemption Reserve | Merger reserve | Hedging and translation reserve | Retained earnings | Total |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance as at 1 October 2011 | 70 | 123,674 | 35,646 | 6,284 | 3,237 | (123,207) | 45,704 |
Loss for the period | - | - | - | - | - | (27,000) | (27,000) |
Other comprehensive income: | |||||||
Currency translation differences | - | - | - | - | (1,051) | - | (1,051) |
Actuarial movements on defined benefit pension schemes | - | - | - | - | - | (340) | (340) |
Tax on items taken directly to equity | - | - | - | - | - | 153 | 153 |
Other comprehensive income/(expense) for the period | - | - | - | - | (1,051) | (187) | (1,238) |
Total comprehensive income/(expense) for the period | - | - | - | - | (1,051) | (27,187) | (28,238) |
Share based payments | - | - | - | - | - | 496 | 496 |
Merger reserve transfer | - | - | - | (6,284) | - | 6,284 | - |
Capital reduction * | - | (123,674) | (35,646) | - | - | 159,320 | - |
Balance at 31 March 2012 | 70 | - | - | - | 2,186 | 15,706 | 17,962 |
* Details of the capital reduction are disclosed in note 22 of the WYG plc Annual Report and Accounts for the year ended 31 March 2012.
Unaudited consolidated statement of changes in shareholders' equity (continued)
For the six months ended 30 September 2012
| Share capital | Share premium |
Capital Redemption reserve | Merger reserve | Hedging and translation reserve | Retained earnings | Total |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 1 April 2012 | 70 | - | - | - | 2,186 | 15,706 | 17,962 |
Loss for the period | - | - | - | - | - | (846) | (846) |
Other comprehensive income: | |||||||
Currency translation differences | - | - | - | - | (576) | - | (576) |
Other comprehensive income for the period | - | - | - | - | (576) | - | (576) |
Total comprehensive income for the period | - | - | - | - | (576) | (846) | (1,422) |
Share based payments | - | - | - | - | - | 1,120 | 1,120 |
Balance at 30 September 2012 | 70 | - | - | - | 1,610 | 15,980 | 17,660 |
Unaudited consolidated cash flow statement
For the six months ended 30 September 2012
Six months ended 30 September 2012 |
Six months ended 30 September 2011 | Year ended 31 March 2012 | ||
Note | £'000 | £'000 | £'000 | |
Operating activities | ||||
Cash used in operations | 16 | (5,315) | (20,270) | (23,917) |
Interest paid | (483) | (1,050) | (1,622) | |
Tax paid | (101) | (323) | (787) | |
Net cash used in operating activities | (5,899) | (21,643) | (26,326) | |
Investing activities | ||||
Purchases of property, plant and equipment | (515) | (190) | (1,368) | |
Purchases of intangible assets (computer software) | (234) | (347) | (583) | |
Purchase of subsidiary undertakings | 19 | 166 | - | - |
Disposal of subsidiary undertakings | 19 | (678) | - | - |
Net cash used in investing activities | (1,261) | (537) | (1,951) | |
Financing activities | ||||
Proceeds on issue of shares | - | 30,625 | 30,625 | |
Repayment of borrowings | (19) | (2,630) | (2,630) | |
Drawdown of loan facilities | - | 4,206 | 4,206 | |
Repayments of obligations under finance leases | (1) | (170) | (151) | |
Net cash (used in)/generated from financing activities | (20) | 32,031 | 32,050 | |
Net (decrease)/increase in cash and cash equivalents | (7,180) | 9,851 | 3,773 | |
Cash and cash equivalents at beginning of period | 23,143 | 19,370 | 19,370 | |
Cash and cash equivalents at end of period | 15,963 | 29,221 | 23,143 |
1. Company details
WYG plc is incorporated and domiciled in England, the address of its registered office is Arndale Court, Otley Road, Headingley, Leeds, LS6 2UJ. The company is traded on AIM, a market operated by the London Stock Exchange plc
The principal activity of the Group in the period under review was that of international multi-skilled consultant. The Group's revenue derives mainly from activities in the UK, Eastern Europe, and Middle East & North Africa.
2. Basis of preparation
This condensed consolidated interim financial information for the six months ended 30 September 2012 should be read in conjunction with the financial statements for the period ended 31 March 2012, which are available on the Company's website at www.wyg.com, and have been prepared in accordance with IFRSs as adopted by the European Union.
This condensed consolidated interim financial information was approved for issue on 29 November 2012.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2012 were approved by the Board of Directors on 7 June 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.
The condensed consolidated interim financial information has neither been reviewed nor audited.
3. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2012, as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.
4. Detailed consolidated income statement
Gross Revenue |
Net Revenue | Operating profit/(loss) | |
£'000 | £'000 | £'000 | |
Six months ending 30 September 2012 | |||
Before separately disclosed items | 61,756 | 54,721 | 254 |
Separately disclosed items | - | - | (320) |
Total | 61,756 | 54,721 | (66) |
Six months ending 30 September 2011 | |||
Before separately disclosed items | 68,487 | 61,302 | (2,545) |
Separately disclosed items | - | - | 42,859 |
Total | 68,487 | 61,302 | 40,314 |
Year ending 31 March 2012 | |||
Before separately disclosed items | 139,864 | 123,436 | (3,467) |
Separately disclosed items | - | - | 17,684 |
Total | 139,864 | 123,436 | 14,217 |
Details of separately disclosed items
Six months ended 30 September 2012 |
Six months ended 30 September 2011 | Year ended 31 March 2012 | |
£'000 | £'000 | £'000 | |
Employee termination costs | - | (356) | (3,435) |
Office closure costs | - | - | (5,374) |
Impairment of goodwill | - | - | (14,800) |
Gain on debt restructuring | - | 49,679 | 49,679 |
Other credits/(costs) | 1,406 | (898) | (611) |
Transaction costs | - | (4,072) | (5,165) |
Share option costs | (1,250) | (1,018) | (1,658) |
Amortisation of acquired intangible assets | (476) | (476) | (952) |
Separately disclosed items | (320) | 42,859 | 17,684 |
The Group has incurred a number of material items in the year, whose significance is sufficient to warrant separate disclosure. The key elements included within separately disclosed items are:
·; Annual charge in relation to share option costs
·; Annual charge for the amortisation of acquired intangibles
·; Other credits/(costs) include the credit arising from the liquidation of the Irish business (see note 19) and additional legacy restructuring costs. In the comparative period, the other costs relate solely to restructuring costs.
5. Segmental information
IFRS 8 requires segment reporting to be based on the internal financial information reported to the chief operating decision maker. The Group's chief operating decision maker is deemed to be the senior management team comprising the Chief Executive Officer the Group Finance Director and the Group Commercial Director. Its primary responsibility is to manage the Group's day to day operations and analyse trading performance.
The Group's segments are detailed below and are those segments reported in the Group's management accounts used by the senior management team as the primary means for analysing trading performance. The Executive Committee assesses profit performance using operating profit measured on a basis consistent with the disclosure in the Group accounts.
The Group's operations are managed and reported by key market segments as follows:
·; UK
·; Eastern Europe (which includes CIS and Western Balkans)
·; MENA (Middle East & North Africa including Turkey)
·; Rest of the World
The results for the period ended 30 September 2011 have been restated to reflect this market segment analysis.
The segmental results for the six months ended 30 September 2012 are as follows:
UK |
EE | MENA | ROW | Group | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | |||||
External sales | 37,750 | 16,107 | 7,181 | 848 | 61,886 |
Inter-segment sales | (130) | - | - | - | (130) |
External gross revenue | 37,620 | 16,107 | 7,181 | 848 | 61,756 |
Net revenue | 32,066 | 15,119 | 6,740 | 796 | 54,721 |
Result | |||||
Operating (loss)/profit before separately disclosed items | (643) | 549 | 293 | 55 | 254 |
Separately disclosed items (Note 4) | (56) | (111) | (143) | (10) | (320) |
Operating (loss)/profit | (699) | 438 | 150 | 45 | (66) |
Finance costs | (679) | ||||
Loss before tax | (745) | ||||
Tax charge | (101) | ||||
Loss attributable to equity shareholders | (846) |
The segmental results for the six months ended 30 September 2011 are as follows:
UK Restated |
EE Restated | MENA Restated | ROW Restated | Group Restated | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | |||||
External sales | 41,287 | 20,106 | 7,126 | 715 | 69,234 |
Inter-segment sales | (747) | - | - | - | (747) |
External gross revenue | 40,540 | 20,106 | 7,126 | 715 | 68,487 |
Net revenue | 35,084 | 18,862 | 6,686 | 670 | 61,302 |
Result | |||||
Operating (loss)/profit excluding separately disclosed items | (3,267) | 653 | 186 | (117) | (2,545) |
Separately disclosed items (Note 4) | (6,623) | (72) | (124) | (1) | (6,820) |
Net gain on debt restructuring | 49,679 | ||||
Operating (loss)/profit | (9,890) | 581 | 62 | (118) | 40,314 |
Finance costs | (1,603) | ||||
Profit before tax | 38,711 | ||||
Tax charge | (323) | ||||
Profit attributable to equity shareholders | 38,388 |
| UK |
EE | MENA | ROW | Group |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Reportable segment assets | |||||
30 September 2012 | 41,849 | 17,513 | 7,686 | 879 | 67,927 |
30 September 2011 | 55,371 | 26,198 | 9,146 | 902 | 91,617 |
31 March 2012 | 43,999 | 23,224 | 8,072 | 919 | 76,214 |
Reportable segment assets are reconciled to total assets as follows:
Six months ended 30 September 2012 |
Six months ended 30 September 2011 | Year ended 31 March 2012 | |
£'000 | £'000 | £'000 | |
Reportable segment assets | 67,927 | 91,617 | 76,214 |
Cash and cash equivalents | 15,963 | 30,119 | 24,280 |
Taxation | 92 | 305 | 815 |
Deferred tax | 327 | 96 | 422 |
Total assets | 84,309 | 122,137 | 101,731 |
6. Finance costs
Six months ended 30 September 2012 |
Six months ended 30 September 2011 | Year ended 31 March 2012 | |
£'000 | £'000 | £'000 | |
Interest on bank loans, guarantees and overdrafts | 82 | 787 | 820 |
Interest on bonds | 401 | 462 | 995 |
Interest on obligations under finance leases | - | - | 1 |
Interest on defined benefit scheme liabilities | 196 | 200 | 369 |
Fair value losses on financial instruments - interest rate swaps | - | 154 | 154 |
Total finance costs | 679 | 1,603 | 2,339 |
7. Tax
The tax charge for the period has been calculated by applying the Directors' best estimate of the effective tax rate for the year with consideration to the geographic location of the profits, to the loss before tax for the period.
8. (Loss)/earnings per share
The calculation of the basic and diluted earnings/(loss) per share is based on the following data:
Six months ended 30 September 2012
|
Six months ended 30 September 2011 Restated | Year ended 31 March 2012
| |
£'000 | £'000 | £'000 | |
Earnings for the purposes of basic and diluted (loss)/earnings per share being profit for the year | (846) | 38,388 | 11,388 |
Adjustment relating to separately disclosed items | 320 | (42,859) | (17,684) |
Earnings for the purposes of basic and diluted adjusted earnings/(loss) per share | (526) | (4,471) | (6,296) |
Six months ended 30 September 2012
| Six months ended 30 September 2011 Restated | Year ended 31 March 2012
| |
Number | Number | Number | |
Number of shares | |||
Weighted average number of shares for basic earnings per share | 64,533,176 | 105,088,851 | 84,811,013 |
Effect of dilutive potential ordinary shares: | |||
Share options | - | 5,140,463 | 8,634,913 |
Convertible shares | - | 1,985,031 | 3,262,894 |
Weighted average number of shares for diluted earnings per share | 64,533,176 | 112,214,345 | 96,708,820 |
(Loss)/earnings per share | |||
Basic | (1.3p) | 36.5p | 13.4p |
Diluted | (1.3p) | 34.2p | 11.8p |
Adjusted (loss)/earnings per share | |||
Basic | (0.8p) | (4.3p) | (7.4p) |
Diluted | (0.8p) | (4.0p) | (6.5p) |
The September 2011 earnings per share have been restated for the adjustment relating to the reporting of separately disclosed items.
9. Dividends
No dividend was proposed or paid in the six months to 30 September 2012 (2011: £Nil).
10. Goodwill
£'000 | |
Cost | |
At 1 April 2011 and 30 September 2011 | 108,708 |
At 1 April 2012 and 30 September 2012 | 108,708 |
Accumulated impairment losses | |
At 1 April 2011, 30 September 2011 | (82,263) |
Impairment charge | (14,800) |
At 1 April 2012 and 30 September 2012 | (97,063) |
Net book value | |
At 30 September 2012 | 11,645 |
At 30 September 2011 | 26,445 |
Goodwill is tested for impairment at the interim and financial year end reporting dates and whenever there are indications that it may have suffered an impairment. Goodwill is considered impaired to the extent that its carrying amount exceeds its recoverable amount, which is the higher of the value in use and the fair value less costs to sell of the cash generating unit to which it is allocated. In the impairment tests of goodwill performed in 2011 and 2012, the recoverable amount was determined based on the value in use calculations.
Management based the value in use calculations on cash flow forecasts derived from the most recent financial forecasts approved by the Board including certain sensitivities, in which the principal assumptions were those regarding sales growth and changes in direct costs.
Following the review at 30 September 2012, management decided that no further impairment was necessary.
11. Property, plant and equipment and intangible assets
Property, plant and equipment | Intangible assets | |
£'000 | £'000 | |
Six months ended 30 September 2011 | ||
Opening net book amount as at 1 April 2011 | 3,771 | 6,547 |
Additions | 190 | 347 |
Disposals | (246) | (7) |
Depreciation and amortisation | (810) | (716) |
Exchange differences | (56) | (20) |
Closing net book amount as at 30 September 2011 | 2,849 | 6,151 |
Six months ended 30 September 2012 | ||
Opening net book amount as at 1 April 2012 | 3,206 | 5,708 |
Additions | 515 | 234 |
Disposals | (4) | - |
Disposal of subsidiary undertaking (note 19) | (158) | - |
Depreciation and amortisation | (717) | (656) |
Exchange differences | (25) | (3) |
Closing net book amount as at 30 September 2012 | 2,817 | 5,283 |
12. Work-in-progress
30 September 2012 |
30 September 2011 | 31 March 2012 | |
£'000 | £'000 | £'000 | |
Work-in-progress | 23,117 | 31,483 | 29,236 |
Provision | (1,571) | (2,477) | (2,170) |
Net work-in-progress | 21,546 | 29,006 | 27,066 |
The value of work in progress comprises the costs incurred on a contract plus an appropriate proportion of overheads and attributable profit. Profit is recognised on a percentage completion basis when the outcome of a contract or project can be reasonably foreseen. Provision is made in full for estimated losses.
13. Trade and other receivables
30 September 2012 |
30 September 2011 | 31 March 2012 | |
£'000 | £'000 | £'000 | |
Amounts falling due within one year | |||
Amounts receivable on contracts | 25,034 | 25,958 | 29,808 |
Less: provision for impairment of trade receivables | (3,157) | (3,800) | (4,791) |
Trade receivables - net | 21,877 | 22,158 | 25,017 |
Prepayments and accrued income | 3,238 | 3,464 | 1,774 |
Other receivables | 1,521 | 1,544 | 1,798 |
26,636 | 27,166 | 28,589 |
14. Financial liabilities
30 September 2012 |
30 September 2011 | 31 March 2012 | |
£'000 | £'000 | £'000 | |
Current | |||
Bank overdrafts | - | 898 | 1,137 |
Obligations under finance leases | 18 | - | 19 |
18 | 898 | 1,156 | |
Non-current | |||
Bank loans | 72 | 121 | 95 |
72 | 121 | 95 | |
Financial liabilities are repayable as follows: | |||
On demand or within one year | 18 | 898 | 1,156 |
In the second year | 72 | 121 | 95 |
90 | 1,019 | 1,251 |
15. Provisions, liabilities and other charges
Claims | Redundancy | Vacant leasehold | Total | |
£'000 | £'000 | £'000 | £'000 | |
At 1 April 2011 | 8,096 | 1,163 | 17,924 | 27,183 |
Additional provisions | 375 | 356 | - | 731 |
Reclassified | - | - | (407) | (407) |
Utilised during the period | (970) | (1,227) | (3,133) | (5,330) |
Exchange impact | - | (18) | (273) | (291) |
At 30 September 2011 | 7,501 | 274 | 14,111 | 21,886 |
At 1 April 2012 | 7,014 | 1,583 | 17,502 | 26,099 |
Additional provisions | ||||
Net impact of disposal of Irish operations (see note 19) | (1,604) | - | (2,453) | (4,057) |
Utilised during the period | (669) | (1,331) | (1,647) | (3,647) |
Exchange impact | - | - | (344) | (344) |
At 30 September 2012 | 4,741 | 252 | 13,058 | 18,051 |
Claims
Provisions are made for current and estimated obligations in respect of claims made by contractors and the general public relating to accident or other insurable risks as a result of the business activities of the Group.
Redundancy
Provision is made for current estimated future costs of redundancy and ex gratia payments to be made where this has been communicated to those employees concerned.
Vacant leasehold properties
The Group has a number of vacant leasehold properties, with the majority of the head leases expiring within the next five years. Provision has been made for the residual lease commitments together with other outgoings, after taking into account assumptions relating to later periods of vacancy.
16. Cash generated from operations
Six months ended 30 September 2012 | Six months ended 30 September 2011 |
Year ended 31 March 2012 | |
£'000 | £'000 | £'000 | |
(Loss)/profit from operations | (66) | 40,314 | 14,217 |
Adjustments for: | |||
Depreciation of property, plant and equipment | 717 | 810 | 1,521 |
Amortisation of intangible assets | 656 | 716 | 1,389 |
Loss on disposal of property, plant and equipment | 4 | - | 374 |
Share options charge | 1,250 | 1,847 | 2,485 |
Gain on acquisition and disposal of subsidiary undertakings (see note 19) | (2,406) | - | - |
Gain on debt restructuring | - | (49,679) | (49,679) |
Impairment of goodwill | - | - | 14,800 |
Operating cash flows before movements in working capital | 155 | (5,992) | (14,893) |
Decrease/(increase) in inventories | 4,172 | (4,036) | (2,193) |
Decrease/(increase) in receivables | 801 | 2,535 | (1,465) |
Decrease in payables | (10,443) | (12,777) | (5,366) |
Cash used in operations | (5,315) | (20,270) | (23,917) |
17. Analysis of net debt
At 1 April 2011 | Cash flows | Other non-cash items | At 30 September 2011 | |
£'000 | £'000 | £'000 | £'000 | |
Cash and cash equivalents | 19,375 | 10,744 | - | 30,119 |
Bank overdrafts | (5) | (893) | - | (898) |
Bank loans due after one year | (48,411) | (1,576) | 49,866 | (121) |
Finance leases and hire purchase contracts | (170) | 170 | - | - |
(29,211) | 8,445 | 49,866 | 29,100 | |
Cash in restricted access accounts | (8,524) | 3,436 | - | (5,088) |
(37,735) | 11,881 | 49,866 | 24,012 | |
At 1 April 2012 | Cash flows | Other non-cash items | At 30 September 2012 | |
£'000 | £'000 | £'000 | £'000 | |
Cash and cash equivalents | 23,143 | (7,180) | - | 15,963 |
Bank loans due after one year | (95) | 19 | 4 | (72) |
Finance leases and hire purchase contracts | (19) | 1 | - | (18) |
23,029 | (7,160) | 4 | 15,873 | |
Cash in restricted access accounts | (6,665) | 3,493 | - | (3,172) |
16,364 | (3,667) | 4 | 12,701 |
Other non-cash movements represent currency exchange differences, the accrual of Payment in Kind (PIK) interest and the impact of the debt for equity swap.
18. Related party transactions
There have been no changes in the nature of related party transactions as described in the 2012 Annual Report and Accounts and there have been no new related party transactions which have had a material effect on the financial position or performance of the Group in the period to 30 September 2012.
19. Appointment of liquidator of Irish operations
Overview
On 24 August 2012 the directors of WYG Group Limited concluded that it was no longer viable to support the loss-making operations in Ireland and consequently WYG Ireland Limited and each of its three trading subsidiaries in Ireland (WYG Engineering (Ireland) Limited, WYG Environmental and Planning (Ireland) Limited and WYG Nolan Ryan Tweeds Limited) appointed a provisional Liquidator on 29 August 2012. The Group effectively relinquished control of its businesses in the Republic of Ireland and in Northern Ireland (WYG Engineering (Northern Ireland) Limited, WYG Management Services (Northern Ireland) Limited and WYG Environmental and Planning (Northern Ireland) Limited) from this date, and in the period ended 30 September 2012 this has been treated as a disposal of a subsidiary undertaking. The provisional Liquidators were formally appointed as Liquidators on 19 September 2012.
On 20 September 2012, the WYG Group completed the acquisition of all three of WYG Ireland Limited's subsidiaries in Northern Ireland for a nominal sum from the Liquidators.
Disposal of Irish operations
As noted above, the appointment of a Liquidator for the Republic of Ireland and Northern Ireland businesses has been treated as a disposal of these businesses in the period. The Republic of Ireland businesses that have been treated as a disposal, account for £1.5m of turnover and £0.1m operating loss in the Income Statement for the six months ended 30 September 2012 (2011: £3.7m turnover, £0.2m operating loss).
The Group recorded a net gain of £1,768,000 arising from the disposal which has been recognised as a credit in the income statement and is included within 'Separately disclosed items' in note 4.
Six months ended 30 September 2012 | |
£'000 | |
Legal and other expenses | (890) |
Assets/(liabilities) disposed: | |
Fixed assets | (158) |
Work in progress and receivables | (4,455) |
Cash | (275) |
Current liabilities | 2,734 |
Provisions, liabilities and other charges | 8,133 |
Vacant leasehold provision for retained property | (3,321) |
Net gain on disposal | 1,768 |
Acquisition of Northern Ireland businesses
The Group's subsidiaries in Northern Ireland have continued to trade profitably and were unaffected by the property issues that have impacted the business in the Republic of Ireland. The entire share capital of the Northern Ireland businesses was re-acquired from the Liquidator on 20 September 2012 for a nominal sum. The assets and liabilities acquired at this date were:
Six months ended 30 September 2012 | |
£'000 | |
Assets acquired: | |
Work in progress and receivables | 2,457 |
Cash | 166 |
Current liabilities | (1,230) |
Provisions, liabilities and other charges | (755) |
Net assets acquired | 638 |
Consideration | - |
Negative goodwill | 638 |
The negative goodwill arising on acquisition has been recognised as a credit in the income statement and is included within 'Separately disclosed items' in note 4.
20. Availability of interim report
The interim report will be posted to shareholders in due course and copies will be available at the Company's registered office at Arndale Court, Otley Road, Headingley, Leeds LS6 2UJ, and on the Company's website: www.wyg.com.