WSP has suffered a drop in profits despite shedding 1,00 jobs and a revenue boost
What is your approach to dealing with the recession?
Our approach is the same as in the last recession in the 1990s and the one before that. I’m concentrating the business in four key areas − clients, costs, cash and workforce.
Can you elaborate?
Clients − for us this has to be to focus on delivery, to look after clients to boost market share. Costs must be kept down and matched to one’s revenue, and this is why we have restructured and reduced our workforce. Cash − we have to be paid and we are pursuing an aggressive cash collection regime. Through all of this we have to look after our workforce to keep them motivated.
What is the situation like in the Middle East?
The Middle East is a special case. But we need to distinguish between the Middle East and Dubai. In Dubai there are significant liquidity problems and there is so far little change there.
So is Dubai still a worry?
Dubai remains a worry where we are owed a lot of money and continue to employ a significant number of people, albeit a lot of them are now working on projects in adjoining regions. Dubai is now 20% of our wider Middle Eastern region, therefore we have stabilised the business in the difficult economic climate and we are now addressing the legacy problem in respect of the recovery of debt.
Which other areas have been challenging?
The property sector is where we have suffered. After taking account of the exceptional costs of restructuring our profit has only dropped about 10%. We take cost reductions on the run and do not list these as exceptional items as other businesses do.
Where are the opportunities?
There is a significant line of work, particularly in north Africa, Jordan, Syria, Saudi Arabia and Qatar. But energy and sustainability is the biggest motivator of industry at this time. For example, we have a project in Scotland with Diageo where we are making a plant that used to consume the equivalent output of 44,000 cars per year nearly Carbon-neutral through the recycling of their process waste. That’s the future.
The sector is poorly rated at the moment. Is this fair?
We have a £1bn order book, and we are a more diversified company than some and this has made us more resilient. One-third of our business is in northern Europe and is doing very well, and we are still highly rated there, as the sector is. Europe’s companies are higher rated, as are America’s. You need only one or two companies to do well or badly in a particular sector to affect everyone.
What are banking conditions like now?
We refinanced our banking conditions at the beginning of 2008. We are well within them − we have up to three times EBITDA as our ratio limit and we are at just a little over one. We took the opportunity to renew our covenants back then as we thought the banking sector would not improve and we were absolutely right.
- Chris Cole is chief executive of WSP Group