WYG warns on profits as Brexit uncertainty dents UK consultancy business

Shares in AIM-listed professional services company WYG tanked on Wednesday as it warned that full-year operating profit will be "materially" below current market expectations as its UK consultancy business takes a hit from Brexit-related uncertainty.

In an update for the year to date, WYG said it now expects a bigger chunk of its revenues to be generated from its international development business as its UK markets take a hit from cautious business sentiment due to Brexit uncertainty.

It noted that its consultancy services segment is seeing some delays in investment decisions regarding new work and the deferral of activity on some existing projects across the public and private sectors.

"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," it said.

That means the group will not meet either of the net debt to EBITDA or interest cover covenants within its facility agreements for 31 March 2019.

Revenue for the year to the end of March 2019 is expected to be in line with the previous year, and revenue and net debt will be broadly in line with current market expectations. However, due to the slowdown in the UK consultancy business, WYG now expects its second half operating profit performance to be below that achieved in the first half, implying operating profit for the year as a whole which is materially below current market expectations.

Chief executive officer Douglas McCormick said: "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. This has particularly affected the construction sector which underpins much of our business in the UK.

"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."

At 1540 GMT, the shares were down 48% to 19.90p.