Wood reviews consulting arm, cuts revenue forecast

Aberdeen-based global engineering group Wood plc said on Friday it has started a strategic review of “the part of its consulting business facing the built environment end market” — as it cut its full-year revenue forecast slightly to $6.4 billion.

Wood said the review will consider a range of options to “best unlock value from this part of the business for shareholders that Wood believes is not currently being recognised in its market capitalisation.”

The part of the business being reviewed is expected to account in 2021 for $1.3bn of gross revenue within Wood’s consulting business unit. It has 7,000 staff, with 6,000 in the US and Canada and the remainder largely in the UK.

The Aberdeen firm’s shares fell about 4.5% to around £1.92 to give the firm a current stock market value of about £1.3 billion. The shares are down about 30% for the past year.

Wood is one of Scotland’s biggest companies, employing around 40,000 people in 60 countries.

The engineering giant said full-year revenue is now expected to be about $6.4 billion, compared to an earlier forecast of between $6.6 billion and $6.8 billion, and below a $6.7 billion company-provided consensus estimates.

In a stock exchange statement, Wood said: “John Wood Group … today announces it has initiated a strategic review of the part of its consulting business facing the built environment end market.

“The scope of the review will consider a range of options to best unlock value from this part of the business for shareholders that Wood believes is not currently being recognised in its market capitalisation.

“It will also assess how best to take advantage of the positive trends and investment opportunities in energy transition and industrial decarbonisation where the company is already a global leader.

The built environment business provides consulting and engineering solutions that address environmental risks, increase climate resilience, help to build more sustainable infrastructure and improve mobility.

“It operates across government, transportation, water, industrial, energy and mining markets and has a track record of attractive growth and resilient performance through Covid-19.

“A growing order book and exposure to both government stimulus for infrastructure development and the drive for sustainability and climate resilience, most notably in North America and the UK, positions the business well for future growth.

In 2021, the part of the business that services the built environment end market is expected to account for c$1.3bn of gross revenue within Wood’s consulting business unit.

“It has approximately 7,000 professionals, with c6,000 in the US and Canada and the remainder largely in the UK.”

Wood also published a trading update, saying that while it is seeing robust activity in consulting and operations, the rate of recovery in projects “has been slower than anticipated largely due to the deferral of activity and awards into 2022.” 

The Aberdeen firm also reported “lower than anticipated lump sum engineering, procurement and construction (EPC) awards.”

The trading update said: “The review is taking place against the backdrop of improving momentum in many of Wood’s markets following the challenging market conditions created by the impact of Covid-19.

“Overall, we expect to deliver improved revenue and earnings in the second half of 2021 relative to H1 2021.

“While we are seeing robust activity in consulting and operations, the rate of recovery in projects has been slower than anticipated largely due to the deferral of activity and awards into 2022.

We have maintained strength in our order book which is up c18% at the end of September compared to December 2020, with growth in consulting and operations, and representing a book to bill of 1.3x.

“Whilst this also includes improvement in projects order book, which is up c3% compared to June 2021, it reflects lower than anticipated lump sum engineering, procurement and construction (EPC) awards offset by higher reimbursable project awards.

“The working capital impact of lower than anticipated EPC awards together with deferred activity will result in higher than previously anticipated full year net debt, which we expect to be broadly in line with H1 2021.

“Full year revenue is expected to be approximately $6.4bn. Adjusted EBITDA margin is expected to be 8.5% to 8.7%.”

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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.