WSP enjoys first in pre-tax profit to £28m

WSP, the consultancy group, has reported an interim pre-tax profit of £28m, well ahead of the previous figure of £16m.

However the latest figure, for the six-month period to 30 June 2008, contains a windfall element running to £5m - the result of some changes with the group’s pension liabilities for its staff based in Sweden. Future risks have been offloaded and put into the hands of a third party scheme run by an entity called Alecta.

WSP’s turnover in the first half was £370m (figure in the comparable period last year: £270m).

The profit margin has lifted from 5.9% to 6.2% when the £5m one-off windfall contribution to the latest pre-tax profit is ignored.

Previously, WSP has reported operating results in three main segments:

• Property
• Transport and infrastructure
• Environment and energy

Following the recent acquisition of CEL International, the industrial process engineer, and CBP, the German project manager, WSP will now add a fourth segment:

• Management and industrial

A second change stems from the success of the group’s transport and infrastructure division in winning the Northampton County Council road network management contract in joint venture with May Gurney, and also the Area 8 Managing Agent Contract (MAC) with Carillion.

The result is that WSP will now change the way in which it handles joint venture activities.

Christopher Cole, chief executive, said: “We are in the fourth year of our 5-Year Plan and the results announced today demonstrate that we are ahead of our published headline financial targets of 15% annual revenue growth and 0.5% operating profit margin improvement each year.

“We remain on course to continue to deliver our plan for the remainder of 2008 and 2009.

“We are working on the preparation of our next 5-Year Plan to take us through to 2013. This will be announced early in 2009.”

WSP now employs more than 10,000 worldwide. The majority of markets remain strong, with “particularly good visibility” in Europe and the Middle East.

The group feels that some sectors are being squeezed while other new ones offer opportunities and these are listed as:

• education
• urban and eco-regeneration
• transport hubs
• London Olympics

WSP’s pension story is that part of the group’s pension obligations were unfunded, defined benefit liabilities in Sweden.

During the six-month period, WSP decided to transfer the future obligations into the government-backed Alecta scheme whereby future liabilities that accrue to employees “will be satisfied by way of contributions to Alecta”.

WSP said: “The nature of these obligations to employees is one of a defined contribution and once annual contributions are paid, no further increase in liability will arise.

“Prior to the transfer, the actuarial assumptions took account of future service benefits expected to accrue to employees. This assumption no longer applies and consequently the present value of the obligation immediately reduces giving rise to a net gain of £6.4m. This gain has been recognised within operating profit.”