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In 2007 Scott Wilson went public and was showered with accolades. One year on chairman Geoff French tells Mark Hansford what's next for the company.

Last year a newly-floated Scott Wilson targeted the NCE/ACE Consultants of the Year Awards above all others. Yes, it was New Company of the Year at the prestigious PLC Awards. Yes, it won Best IPO of the Year at the Shares Magazine Award. But picking up the NCE/ACE award was the one that mattered.

"Winning the Major Firm award at the NCE/ACE Consultants of the Year Awards last year was terrific for us. It was the exterior proof of how much the company had changed," says Geoff French.

"We had come from being, in your words, 'a clunky old-style consultancy'. We felt we had made a significant change.

"But it is one thing to say this internally and another to be assessed so by external parties."

This change continues apace, with the firm announcing last week that Hugh Blackwood, joint chief executive, is to become group chief executive from 1 May. Ron Wall, currently joint chief executive, will step down from the board on the same date.

Clunky structure

French says the change marks the next step in the transition from that "clunky" pre-flotation business structure to that of a plc. "When we went to the market – which was two years ago now – we recognised that the structure we had at the time, with joint chief executives, was unusual, but part of our transition from private ownership to a plc structure.

"Because things have gone well, that transitional arrangement has clearly worked well. But we always said it would be an interim arrangement," says French.

Scott Wilson remains a darling of the City, and on the back of the Blackwood announcement and a trading statement reporting "favourable" market conditions, analysts this week rated its shares as a "buy".

But the one thing about being a plc is that you can never rest on your laurels, given the City's insatiable demand for constant growth. And these are turbulent times for traders, with the credit crunch and fears of a global recession adding to the tension. Indeed, Scott Wilson's share price has not been immune from falling prices – it is currently trading at around 235p, down on its summer 2007 peak of 331p.

French is unperturbed, however, as Scott Wilson's varied portfolio of projects and clients provides a modicum of insulation from any impending spending freeze. What's more, he is a little amused that the firm's international credentials, barely of interest to the City
last year, are now being held up as a trump card.

"A couple of years ago the City was only slightly interested in our international activities. Now it has turned almost on its head," he says.
The City's interest in all things overseas is a direct reaction to fears of a spending hiatus domestically, but French doesn't see it.

"Last month Transport for London announced a £39bn funding package including Crossrail – but that went almost unnoticed. Crossrail has suddenly gone from something that was talked about to being firmly in the budget – that is a major move. And the rest of that £39bn, yes it was in the comprehensive spending review in October, but that was before the credit crunch really hit and now it has been confirmed.

"But where are you going to see that very good news reported?"

French is confident that in the UK the main market for civil engineers, namely infrastructure, will remain strong.

"Most at risk has to be the Highways Agency as its budget is set for shortest period. But TfL has a confirmed budget for the next decade and Network Rail the next five years.

"Private commercial will be the first hit by any spending slowdown. But that accounts for around 5% of our overall turnover. One of our targets has always been to have a balanced business. It is how we manage our risk. We'll maintain that balance, and our balance internationally."

As a consultancy, French believes Scott Wilson has better protection than contractors, as it is here that any slowdown will hit first.

"Contractors have a particular issue and Stonehenge is a classic example – which I can talk about it because we have not been involved at all – where a large amount of money has been spent on something that will not get built and almost all of it has gone to consultants studying and restudying it. Contractors only get a significant payback when the thing gets built.

"What happens in any slowdown is spending gets put back, people start to reassess priorities, investigate implementation in stages, and who do they turn to – consultants."

Of more concern for Scott Wilson the plc is the need to feed the City's demands for growth – something it is just about managing to satisfy.

"From that point of view things continue to go smoothly," confirms French. Figures in this year's Consultants File show fees in 2007 were £300M, up £50M or 20%, on last year.

2008 targets
Interim results for the six months to 31 October 2007 are better still with revenue up 35% to £153M on the comparable period the year before; adjusted operating profit up 53% to £11M and an order book up 12% to £280M. Last week's trading statement added that 2008 targets will be met.

The statement added that the group continues to identify opportunities to supplement its strong organic growth with "value-enhancing acquisitions". Net group borrowings remain modest, providing room for those acquisition opportunities, which fit the group's strict commercial and financial criteria.

Organic growth and acquisitions is, French agrees, the way to go. But since the firm snapped up Ferguson McIlveen, Cameron Taylor Grant and DGP International during its flotation honeymoon, acquisitions have dried up a little.

"In our business we make acquisitions carefully as we are acquiring people and we have to be sure they will fit in," says French. "It was quite opportune that all three acquisitions came up at the same time as we floated [when we were cash rich].

"We have looked at many since, and have done a couple of smaller ones including DCL Consulting Engineers. And we have come close to doing a couple of bigger ones – we have even done due diligence and then pulled the plug.

"With the changes to Capital Gains Tax coming people have rushed to put themselves on the market, but we are not desperately interested," he says.

So if acquisitions are, to a degree, out of French's control, capitalising on a booming international market is not.

"The challenge since flotation has been to improve our margins internationally. For the first half of this year they are 5%, which is on course for the same sort of margins we get at home.

"There is an awful lot of work out there. There has never been a time when the world is as busy. In the UK; the Middle East; India is developing fast; China; everywhere is busy," he says.

"So the challenge is to pick the right projects. We've been moving away from aid funded public sector work towards the private sector, PFI included," he says. Winning a slice of that work is down to strategy.

"The world is becoming a much smaller place. Instead of UK people, we've now got people from around the world moving around the world. Our staff in India last year worked in 12 countries and in China it was 18.

Global workload
"A lot of the Chinese market is associated with Chinese contractors. Chinese contractors are very strong and enjoy working internationally with international consultants and if they can work with the Chinese end of an international consultant all the better."

The global workload is not likely to fall off either. "For the first time in history 50% of the world lives in urban areas," he says. "Post-urbanisation equates to a need for infrastructure – roads, rail, water, wastewater – and all of it done in as sustainable and environmentally friendly a manner as possible."

This global workload is, of course, dependent on a stable globe – something that French says gives him sleepless nights.

"What keeps me awake at night? When the analysts ask me that, I always say George Bush bombing Iran – if somebody did something like that it would have ramifications."

In comparison, he says, the credit crunch is nothing. "Almost by talking about the economy failing we are talking up the likelihood of it happening and we are not seeing any evidence of that so far," he maintains.

He's also fairly dismissive of the skills issue – even if he does support the ACE's quest to get civil engineers added to the Home Office's "endangered species" list of skills in demand. Adding civil engineers to this list would allow UK consultants to plunder resources from overseas.

"I said the world was a smaller place and we ought to be getting people in from around the world. I don't believe in protectionism."

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