Wood Group cuts jobs and pay, scraps divi; shares up

Shares of Aberdeen-based Wood plc, the global engineering and consulting company, recovered some lost ground on Thursday after the firm issued a stock exchange statement on its actions taken to cope with the coronavirus crisis and the sharpest decline in oil prices in 20 years.

Wood said its “board, executive directors and senior leaders” have elected to take a voluntary, temporary 10% reduction in base salary and “an additional group of employees is also being asked to do the same” in moves that will “generate overhead savings in 2020 of c$40m.”

The Aberdeen firm continued: “In response to changing activity levels we are focusing on redeploying people wherever possible alongside considering reduced working hours, unpaid leave and furloughs. Regrettably, employee reductions are also being made in certain areas reflecting the reduction in operational activity.”

On its dividend, Wood said: “In the statement of our results for 2019, which we published on 10 March 2020, we noted that the board had recommended a final dividend of 23.9 cents per share (total cost $160m).

“Whilst the board recognises the importance of dividends to shareholders, given the unprecedented levels of uncertainty and measures being taken to protect cashflows and preserve long term value, the board considers it prudent and appropriate to withdraw its recommendation.”

Wood shares rose about 17% to around 172p on Thursday — but the stock was trading over 400p in late February.

Wood, one of Scotland’s biggest companies, operates in more than 60 countries, employs 55,000 people, and has revenues of around $10 billion.

“Like many companies, Wood is being affected by the unprecedented event of Covid-19 and its impact on the global economy – an event compounded by the sharpest decline in oil price in 20 years …” said Wood CEO Robin Watson. 

“Today we announce a series of actions which keep our people safe and healthy and will further protect our business and our stakeholders by reducing cost, protecting cashflow and ensuring continued balance sheet strength.

“This includes the board’s prudent and appropriate decision to withdraw its recommendation to pay the proposed 2019 final dividend.”

On other measures and updates, Wood added: “We have taken significant steps to enable our workforce to work from home and deliver for clients resulting in over 40,000 employees successfully working remotely …

“We have considerable levels of financial headroom and liquidity. We entered 2020 with a strong balance sheet foundation with c$1.4bn of headroom against our debt facilities … “

“Wood has access to financing facilities that consist of bilateral term loans of $300m, a revolving credit facility of $1.75bn and US private placement debt of c$880m …

“Our order book at the end of February before the recent fall in oil prices was $8.0bn with around 70% of 2020 activity delivered or secured. Looking forward, we anticipate that some of the existing order book will be subject to postponement and that new order intake will slow due to the impact of COVID 19 and lower oil prices …”