WSP Group

Diversification continues to underpin the delivery of strong financials from engineering consultant WSP, whose interim results to June proved nothing short of excellent despite wider woes in the US and UK economies.

First half pre-tax profits (before exceptional items) increased by more than 40% to £23m, on turnover lifted to £363.5m (2007: £260m), reflecting a neat balance between organic growth and acquisitions made in the second half of 2007, while operating margins expanded to 7.2% (6.5%). From a healthy 40% leap in earnings to 25.4p, the proposed interim dividend was increased by 25% to 5p.

Driving the positive performance was the group’s exposure to a diverse array of sectors and regions ranging from transport and infrastructure work to activities in environment and energy to the credit-crunch hit property sector, where WSP achieved notable sales and profits growth, with its UK market leadership and presence in the major metropolitan US cities offering ‘some protection from the effect of the liquidity crisis’. Buoyant trading in the Middle East and mainland Europe also fuelled growth.

WSP, which continues to snare major projects, particularly in the Middle East, also saw growth in the order book from a year-end £0.9bn to £1.2bn, giving management and investors terrific visibility of earnings. For the full year, analysts see WSP growing adjusted pre-tax profits from £40.1m to £49m, ahead of £54m for December 2009. Earnings of 53.6p and 59p leave the dividend-paying shares trading on prospective multiples of 9.5 and 8.7, far too low for a high quality consultant with a demonstrable track record.

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