Aberdeen’s Wood says order book down 11% to $7bn

Aberdeen-based Wood plc, the global engineering and consulting company, said on Friday its order book at the end of May was $7 billion, down about 11% since December 2019.

Wood said first-half adjusted EBITDA earnings on a like for like basis will be down around 19% and “in 2020 the risk of further delays and postponements persists.”

Wood CEO Robin Watson said: “The global engineering and consultancy market is facing unique and unparalleled challenges in 2020 from Covid-19 and volatility in oil prices.”

The group said on a reported basis, first-half revenue will be around $4.1 billion and adjusted EBITDA earnings will be around $295 million to $305 million.

Wood employs around 55,000 people in more than 60 countries and in recent years has had annual revenues of around $10 billion.

In a trading update for the six months ended June 30, 2020, Wood said: “On a like for like basis, adjusting for the disposals of the nuclear and industrial services businesses in Q1 2020, first half revenues will be down around 11% on H1 2019 demonstrating the resilience of demand for our services across a diverse market footprint.

“Reflecting the timing of macro challenges, the fall in H1 revenues was heavily weighted to the second quarter.

“Revenue in the second quarter is expected to be $2.0bn.

“First half revenue included increased renewables activity and relatively robust activity in chemicals & downstream and built environment markets. 

“Adjusted EBITDA on a like for like basis will be down around 19% with margins down c70bps.

“This reflects the benefit of our actions to protect margins, together with the impact of cost overruns of on the legacy energy projects in ASA. 

“On a reported basis, revenue will be around $4.1bn, adjusted EBITDA will be around $295m to $305m and operating profit before exceptionals will be around $80m to $90m.”

In its full-year outlook, Wood said: “We are focused on protecting our margin in line with our strategic objectives by managing operational utilisation and delivering >$200m of overhead cost reductions to deliver significantly stronger second half margin performance.

“Order book at the end of May was $7.0bn, down c11% since December 2019, of which c$3.5bn is due to be delivered in 2020 …

“Typically, around 80% of our full year revenues are either delivered or secured at this point in the year.

“However, in 2020 the risk of further delays and postponements persists and we are prepared for a wider range of outcomes depending on activity across our broad end markets.

“Our completed actions to protect margin give us confidence in delivering significantly stronger margins in the second half.”

CEO Robin Watson added: “Despite the disruption, we are continuing to successfully win and execute work, supported by our strategy of broadening the business across the global energy market & the built environment.

“The relative strength we are seeing in chemicals & downstream, the built environment and renewables, where we will double our revenues in 2020, is helping to mitigate the impact of challenging conditions in upstream and midstream oil & gas. 

“We have a proven track record of leveraging our flexible, asset light model at pace to protect margin and in Q2 completed the actions required to deliver overhead cost savings of over $200m in FY 2020.”