Project management and consultancy group WYG PLC (LON:WYG) has lowered its full-year profit forecast as Brexit continues to make for a “cautious” business environment.
In previous years, WYG has seen a surge in demand for its consultancy services in the UK between January and March – the final quarter of its financial year.
But like many others, the AIM company is “seeing some delays in investment decisions” while businesses wait to see what happens once the UK formally leaves the European Union on March 29.
WATCH: WYG on ‘road to recovery’
“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,” read a statement on Wednesday afternoon.
Things are looking better abroad though, and WYG PLC (LON:WYG) now expects revenues in the international development division to be ahead of forecasts, while the company also boasts a “good” order book in Turkey and Africa.
But this is a lower-margin division compared with the UK as it continues to incur high costs when bidding for new contracts.
All this means that operating profits for the year to 31 March will be “materially below current market expectations”. Net debt is set to be around £10.0mln at the year-end – in line with estimates, although it is looking at ways to bring this down.
WYG has also cautioned that it is unlikely to meet either of its net debt-to-EBITDA or interest cover covenants.
It has opened talks with its bank to either secure a deferral or waiver of the relevant covenant tests.
‘Unusually difficult Q4’
“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,” said chief executive Douglas McCormick.
“This has particularly affected the construction sector which underpins much of our business in the UK.”
He added: “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.”
Shares were down 53.5% to 17.9p on Wednesday afternoon.