Wood revenue slips below $10bn but EBITDA hits $855m

Aberdeen-based Wood plc, the global engineering and consulting company, said on Tuesday its 2019 revenue slipped 1.2% to $9.89 billion but pretax profit soared to $148.7 million from $53.5 million a year ago, partly due to lower exceptional charges.

Wood’s preferred profit measure of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 23% to $855 million.

The company’s 2019 exceptional costs included a $46 million provision “in respect of certain regulatory investigation settlements” related to Amec Foster Wheeler which predate Wood’s takeover of the firm in 2017.

Wood explained: “Discussions concerning possible resolutions of the investigations by the authorities in the US, Brazil and Scotland have progressed to the point where the group believes that it is likely to be able to settle the relevant matters with these authorities at an aggregate cost of approximately $46m …

“The group could also face further potential civil and criminal consequences in relation to the investigation by the SFO …”

Wood added: “The income statement charge of $106.6m mainly related to investigations by the authorities in the US, Brazil and Scotland and have progressed to the point where the group believes that it is likely to be able to settle the relevant matters with these authorities at an aggregate cost of $46.0m and this is reflected as a provision at 31 December 2019. 

“Achieving resolution of the relevant matters will involve negotiations with five authorities in three separate jurisdictions, and accordingly there is no certainty that resolution will be reached with any or all of those authorities or that the aggregate settlement amount will not exceed the amount of the provision.

“The expected movement related to provisions in 2020 is approximately $100m …”

Wood CEO Robin Watson said the group has experienced “no material impact to date” from Covid-19 and that “the broader impact of this, and the substantial reduction in oil price, on customers’ existing and new projects is as yet uncertain.”

Watson said: “As such, it is too early to quantify the potential impacts and also actions we will take to mitigate them.

“We have proven track record of leveraging our flexible, asset light model in response to changing market conditions.

“In addition, over the last five years the group has diversified its end markets such that upstream/midstream oil and gas represents only 35% of revenue.”

Total dividend rises 0.9% to 35.3c per share.

Wood shares rose about 3% to 280p to give the firm a current stock market value of around £1.9 billion.

Wood employs about 60,000 people in around 60 countries.

CEO Watson added: “In 2019 we delivered earnings growth, margin improvement and strong cash generation which resulted in a reduction in net debt.

“Our strategy has driven decisive action to align Wood with the significant growth opportunities in energy transition and sustainable infrastructure and we made good progress on portfolio optimisation and the repositioning of our consulting, project and operations service offering in 2019.

“The disposal of our nuclear and industrial services businesses generated proceeds of c$430m in Q1 2020 and accelerated progress to target leverage.

“We are confident that from this foundation we are building a differentiated, premium, higher margin business, supported by a continued focus on margin improvement, execution excellence and portfolio optimisation.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.