Wood shares up 20% amid £2bn unit sale news

Shares of Aberdeen-based global engineering and consulting giant Wood plc rose more than 20% on Thursday after it announced it has started a “full sale process” for its big consulting business called “Built Environment” that helps companies and governments assess environmental risks.

Some analysts estimated the unit could be valued at as much as £2 billion.

Bloomberg reported the Aberdeen group is working with investment banks JPMorgan Chase & Co. and Morgan Stanley to identify potential buyers for the Built Environment business.

Wood also published a trading update for the financial year ended December 31, 2021, saying results are in line with its expectations for revenue and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and in line with consensus.

It reported that revenue of around $6.4 billion was down 14% on a like-for-like basis, with growth in consulting and operations more than offset by a significant decline in projects.

Wood reported adjusted EBITDA of around $550 million to $560 million, down 9% on a like-for-like basis.

Net debt was $1.4 billion, an increase of $400 million on last year, reflecting “a large working capital outflow, including an unwind in working capital in our projects business due to lower EPC (engineering, procurement, and construction) activity from market conditions and contract portfolio de-risking, as well as expected exceptional cash costs including around $70 million in regulatory payments.”

On the strategic review of its Built Environment business, Wood said: “As announced on 12 November 2021, the group initiated a strategic review of the part of our consulting business facing the built environment end market, which accounts for around 70% of consulting revenue.

“This Built Environment business generated revenue of around $1.3 billion and adjusted EBITDA of around $150 million in 2021.

The strategic review has considered a range of options to best deliver value for our shareholders and to strengthen the group.

“The board has concluded that a full sale process for the Built Environment business is the best option and this process is underway.

“A sales agreement is expected to be announced in Q2.

The strategic review is also assessing how we can best take advantage of the positive trends and investment opportunities in energy transition and industrial decarbonisation where we are already a global leader.

“The remainder of our consulting business covers a range of solutions centred on energy transition, such as hydrogen, carbon capture technologies and digital integration solutions.”

In its outlook, Wood said: “We expect activity levels to improve in 2022 across our business.

“We have seen good momentum in order in-take in the fourth quarter of 2021, including an improvement in projects.

“We expect our order book at 31 December 2021 to be significantly higher than 31 December 2020 with growth in all business units.

“Growth is most notable across conventional energy and built environment.”

Wood CEO Robin Watson said: “2021 saw improving momentum across our businesses, against a backdrop of continued challenging market conditions.

“Together with significant growth in our order book, this enables us to start 2022 confident that activity levels are improving.

“We also continued to make good progress in de-risking the group’s project portfolio and in driving margin improvement in 2021.

While our leverage is higher than we would like, we anticipate that this will reduce significantly with proceeds from the proposed sale of our Built Environment business and higher activity levels.

The board has concluded that a sale of our Built Environment business is the best option to deliver value for our shareholders.

“It will also strengthen the group as we look to capitalise on the significant opportunities ahead of us, including in energy transition and industrial decarbonisation”.