Wood order book rises to $6.4bn, but revenue flat

Wood CEO Ken Gilmartin

Aberdeen-based global engineering and consulting giant John Wood Group said on Tuesday its order book rose 5% to $6.42 billion but revenue was flat at $2.56 billion in the six months to June 30, 2022.

Wood said first-half adjusted EBITDA slipped 5% to $185 million.

Net debt including leases rose 21.5% to $2.15 billion.

In its outlook, Wood said it expects an improved performance in the second half and its full-year guidance is for revenue of between $5.2 billion and $5.5 billion and adjusted EBITDA of between $370 million and $400 million.

Wood employs about 40,000 people in 60 countries.

On dividends, Wood said: “Our priority is maintaining a strong balance sheet.

“Given the group’s current elevated levels of debt, the board has decided not to recommend any dividends in relation to 2022.

The sale of the Built Environment Consulting business will transform our balance sheet and restore financial flexibility.

“The board recognises the importance of dividends to shareholders and will consider our approach to dividends in 2023 and beyond alongside other capital allocation options.”

Wood shares fell about 5% and are down almost 40% for the past year.

Wood CEO Ken Gilmartin said: “Since becoming CEO in July, I have been really encouraged to see the improving operational momentum across our business, including some great client wins.

“The strong order book gives me confidence for the future but there is a lot more to do on cash generation and this is our top priority.

“We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow.

“We perform complex work in critical industries and our outstanding technical expertise and strong long-term client relationships position us well for growth across targeted markets.

“We have the consulting and engineering capabilities to help the world solve the global challenges of energy security, decarbonisation and energy transition.

“I look forward to sharing our plans at our capital markets day in November.

“In the meantime, we are focused on our culture and energising our people, performance excellence and strengthening our balance sheet through the completion of the sale of the Built Environment business, which we expect around the end of Q3”.

Analyst Andy Murphy, director at Edison Group, said: “This set of results show a mixed outlook for Wood PLC.

“Whilst the first half of the year saw the group gain a strong momentum in activity levels, the group’s adjusted EBITDA and operating profit before exceptional items were down 5% and 8.9% respectively from last year.

“During Ken Gilmartin’s first six months as the CEO, the groups focus has been to produce an updated strategy which draws on the groups operational strengths to deliver long-term sustainable growth.

“Despite the decline in operations, H1 ended with a strong order book going forward into H2.

“Indeed, the group’s order book revenue from continuing operations for the second half of 2022 is $2.5 billion, representing an overall increase of 9% compared to the year prior.

“With the group continuing to win new contracts, including two projects in Uzbekistan with combined value of over $200 million, senior management remains hopeful that it the groups revenue for FY22 will be between $5.2 billion and $5.5 billion, and its adjusted EBITDA between $370 million and $400 million.”

AJ Bell investment director Russ Mould said: “In theory Wood Group, with its energy services focus, should be a beneficiary of buoyant prices, but that doesn’t appear to be the case with revenue and profit dipping in its first-half period.

“The company’s pivot away from large projects is partly to blame and investment in the energy sector is yet to really pick up despite the significant cash windfall many companies have been enjoying.

“Often there is a lag between a recovery in the oil and gas market and any increase in industry spend. The danger for Wood is that a weaker economic outlook puts businesses off sanctioning major developments.”