Shares of Aberdeen-based consulting and engineering giant Wood plc fell as much as 60% on Thursday after the firm said it agreed to commission an independent review to be performed by Deloitte “following the exceptional contract write-offs relating to the exit from lump sum turnkey and large-scale EPC reported at the half year 2024 results.”
Wood Group said: “This review will focus on reported positions on contracts in Projects, accounting, governance and controls, including whether any prior year restatement may be required. An update will be provided as appropriate following its conclusion.
“The results presented in this trading update, and our full year outlook, are before any potential impacts from the independent review.”
Wood Group said its results for the six months to June 30, 2024, “were unaudited and have not been reviewed by auditors.” It said the comparative results for the six months to June 30, 2023, “were unaudited and have been reviewed by auditors.”
The company’s stock market value has plummeted to about £400 million.
The news of the Deloitte review came as Wood reported a “mixed” performance for the quarter ended September 30, as third-quarter revenue edged 1% higher to $1.486 billion with “strong growth in Operations offsetting lower revenue in Consulting and Projects.”
Wood said its group revenue for the first nine months of the year was $4.330 billion, around 3% lower than the same period last year, “mainly reflecting lower revenue in our Projects business following our shift away from large-scale EPC work and lower pass-through activity.”
The Aberdeen firm said group adjusted EBITDA for Q3 was lower than last year “with growth in Consulting and Operations more than offset by a decline in our Projects business.”
It said group adjusted EBITDA YTD was up 4% “with very strong growth in Operations and modest growth in Consulting partly offset by the weakness in Projects.”
Wood said: “Consulting continues to expand its margins. Q3 revenue was down 9% to $163 million with YTD revenue down 3% to $505 million, with lower activity levels in our technical consultancy business partly due to client hesitancy around political and regulatory outcomes.
“Consulting YTD EBITDA was slightly higher than last year, with a higher margin driven by enhanced business mix and improved pricing.
“Projects performance was impacted by weaker end markets. Q3 revenue was down 2% to $584 million, with YTD revenue down 9% to $1,669 million, reflecting in part the move away from large-scale EPC work and lower pass-through activity, as well as ongoing weakness in our minerals, life sciences and chemicals businesses.
“Projects YTD EBITDA was lower than last year, following a significant reduction in Q3. This reflects ongoing weakness across minerals and life sciences, plus delays in awards across our chemicals business. This topline weakness, combined with elevated overheads, was the main driver of the lower adjusted EBITDA in the quarter. We continue to take actions to redress this underperformance in Projects.
“Operations continues to see strong momentum. Q3 revenue was up 9% to $652 million, with YTD revenue up 8% to $1,954 million. The revenue growth reflects higher activity levels, particularly in Europe and the Middle East. We are also seeing diversified market growth with the first major LNG win of scale won by the Operations team in Australia.
“Operations YTD EBITDA was higher than last year, helped by good operational performance.
“Investment Services Q3 revenue was down 12% to $86 million, with YTD revenue down 31% to
$202 million. This mainly reflects the run-down of our facilities business as planned.”
Wood said its order book at September 30, 2024, was around $5.4 billion, down 8% compared to September 2023 and lower than the $6.1 billion position at June 2024.
“This reflects the phasing of large awards in our Operations business and ongoing weakness in Projects across minerals and life sciences, as well as delays in awards across chemicals,” said the firm. “We expect the fourth quarter order book to reflect large work being awarded in Operations and Projects.”
Wood reported a number of business wins in the period.
“We continue to develop our pipeline, particularly across sustainable solutions which now represent 46% of our pipeline, up from 39% at the half year,” said the group.
Significant contract wins in the period included a six-year contract with Shell for the world’s largest floating offshore LNG facility in Australia, a three-year contract to operate the Freepoint Eco-Systems advanced recycling facility, a $40 million engineering design for a sustainable packaging production plant in Singapore and a seven-year master service agreement worth $200 million with BC Hydro, a Canadian electric utility corporation, to modernise and expand the electric grid in British Columbia.
In October, Wood secured a significant engineering contract with Aramco “to provide a range of services including pre-FEED, FEED and EPC contracting support for gas facilities in Saudi Arabia.”
Wood CEO Ken Gilmartin said: “We continue to make progress on our turnaround, building a simpler, higher quality Wood. Our Simplification programme is on-track to deliver annualised savings of c.$60 million, and we completed the sale of CEC Controls and agreed the sale of EthosEnergy in the period. The increasing quality of our business is evidenced by higher pricing, expanded margins and a higher share of our pipeline from sustainable solutions.
“It was, however, a mixed quarter for group performance. We saw strong year-on-year growth in Operations and margin expansion in Consulting. Our Projects business delivered a disappointing quarter, impacted by delayed awards in our chemicals business and our continued weakness in minerals and life sciences. As such, we continue to take actions to redress this underperformance.
“We have reiterated our full year guidance of high single digit growth in EBITDA and net debt to be broadly flat compared to last year, assuming the sale of EthosEnergy completes by year end.”