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WYG in profit warning after contract review

WYG has warned that its operating profit will be “significantly lower” year on year after a series of project delays and legacy issues.

In a trading update to the City today, the consultant said that while revenue expectations for the current financial year exceeded £160m, operating profit was now expected to be “significantly lower” than previously expected. 

New chief executive Douglas McCormick, who joined the business after former CEO Paul Hamer moved to Sir Robert McAlpine as chief executive, said the announcement was “prudent and necessary”, adding that the profit warning was down to slow trading in the first quarter coupled with “legacy issues”.

Four areas of the business are forecast to deliver lower profit than previously expected: international development; consultancy services; real estate; and planning and transport planning.

Following a review of the major contracts in its consultancy services business, WYG said it had identified “a small number of engineering contracts that are likely to deliver lower profitability than originally forecast”.

“This has been further compounded by lower-than-anticipated volumes under certain framework contracts, though activity on these is now starting to flow through,” the firm added.

The international development arm has been hit by delays to two major projects, awarded in January and June this year. WYG said it originally expected the projects to “mobilise quickly”, but both have since taken longer to start than anticipated.

The consultant has also seen project delays in its Turkish business with a slowdown in activity expected towards the end of the year.

In planning and transport planning, profit is expected to be hit after the department performed below expectations at the start of the financial year, while WYG said the real estate business – acquired in 2015 – has “performed well below budget” and would not meet its projected profit targets.

“Performance in all these business units is expected to show some recovery in the second half,” the consultant added.

The consultant also warned that its Polish business, which has been significantly restructured over the last 12 months, was also “unlikely to achieve its targets for the year”.

However, the group said its order book “remained stable” at £144m and that medium-term growth prospects “remain very positive”.

Mr McCormick, who formerly headed up fellow consultancy Sweett Group, added: ”I have visited some 20 of our offices and spoken with several hundred of our staff in my first three months, and I am firmly of the view that the underlying business is a sound platform from which to grow in the medium term”

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