Growing by Design

09/10/2008 12:00 am EST

Focus: GLOBAL

John Snowden

Contributor, The IRS Report

John Snowden, editor of The IRS Report, is bullish on the prospects of a venerable international design firm.

Hyder Consulting (LSE: HYC) is a 150-year-old UK-based international advisory and design consultancy specializing in property, transport, water, environment, energy, and resources.

During the year ending March 31, 2008, revenues rose 15% to £233.7 million, with profit before tax rising 38% to £14.4 million. The order book was up 29%, and the dividend paid for the year increased 50%, from two pence to three pence.

The 2012 London Olympic Games should also be profitable as Hyder assists clients who provide water, transport and environmental services. Acquisitions of Voigt Ingenieure and Seib Ingenieur-Consult not only provided new business streams but also made the group one of the largest six advisory and consultancy companies in Germany.

The company is a leader in the Middle East, with large-scale projects including the Burj Dubai and Al Reem Island in the UAE. Hyder is involved with two major property projects in Qatar—the Lussail Development for a bridge design for a new community to the north of Doha and the 100-story Al Quds Tower.

If we do have a recession in the UK, Hyder should offer some protection. The Australian side is expanding with the resources boom and the acquisition of Crescent PSS, an advisory project management consultancy whose clients include mining giants BHP Billiton (NYSE: BHP), Xstrata (LSE: XTA), and Rio Tinto (NYSE: RTP). Australia’s signing of the Kyoto Protocol should bring additional contracts as environmental responsibility is pushed higher up the agenda.

The company acts as consultants in Hong Kong to both the City and Polytechnic universities and is involved in a number of transport upgrades. Hyder already has a leading role in Hong Kong’s greening master plan and is involved in leisure and commercial projects in China’s Hua Dong region.

I believe that the worldwide spread of operations will enable steady progress of the businesses worldwide. Brokers have forecast pre-tax profits for the current year, ranging from £17.6 million to £18.39 million, rising to £19.9 million to £20.8 million for 2010.

The share price has fallen from 541 pence during the last year and is currently at or near the low point. I believe the shares are well worth buying as a medium- to longer-term holding.

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