15/04/2008
WSP Group, the fast-growing engineering and design consultant whose diverse attractions and order book strength we flagged up at 584p last month, has cheered with news of an £85 million Highways Agency contract which further strengthens the investment case for the company.
Won through its 40:60 joint venture with Carillion, the five-year contract covers road networks across counties such as Northamptonshire, Bedfordshire and Hertfordshire, starts in September and has the potential for extensions until 2015. The deal represents a further contract-coup for WSP, bossed by respected chief executive Chris Cole, adding yet further visibility of earnings to a business already boasting an order book at an all-time peak.
More specifically, it further strengthens the company’s position in the UK highways market in the wake of the recent securing of the Northamptonshire County Council highway services contract earlier this year. Investors may recall that the FTSE 250-quoted company specialises in projects across the property, transport and environment sectors and has a worldwide reputation for its expertise in the ‘trophy’ buildings space.
With analysts forecasting good growth in profits from £40.1m to £46.6m this year, giving earnings of 50.4p, WSP trades on a prospective multiple of only 11.6 times at the current 572.5p. That rating reflects misinformed market concerns about its exposure to property but, as we have outlined previously, WSP is a robust, resilient, dividend-paying business, with the ability to continue growing in fair economic climes or foul. Keep buying.
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| Market cap: | £359.13m |
| PE Forecast: | 11.6 |
| Share price: | 572.5p |
| LSE | £157.82m |
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