Shares of Aberdeen-based engineering and consulting giant John Wood Group fell as much as 50% to around 31p on Friday after it published a “difficult” trading update for the year ended December 31, 2024 — and an update on an ongoing independent review at Wood by Deloitte.
On November 7 last year Wood shares fell as much as 60% when the Aberdeen firm said it agreed to commission an independent review 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.”
On Friday, Wood said the review was continuing and revealed: “The company is initiating steps to strengthen significantly the group’s financial culture, governance and controls in light of material identified weaknesses and failures.”
The firm said actions were being taken to “mitigate weaker-than-expected trading in Q4” including “cancelling executive and employee bonuses and actively managing working capital at year end.”
Wood provided an updated 2025 outlook, saying it now expects negative free cash flow of $150 million to $200 million in 2025 and that it is targeting proceeds from disposals this year of $150 million to $200 million to offset the negative free cash outflow and maintain debt levels at 2024 levels.
Overall, Wood shares are down about 80% for the past 12 months, reducing the firm’s stock market value to about £214 million.
“The outline results presented here are draft and subject to the conclusion of the independent review and full year audit, including the treatment of any prior year adjustments,” said Wood.
“This trading update is not a preliminary statement of annual results and has not, therefore, been reviewed by the company’s auditors. An update on the timing of our full year results will follow in due course.”
On trading, Wood said its order book increased to $6.2 billion at December 31, 2024, significantly improved on the $5.4 billion at September 30, 2024.
Wood reported FY24 adjusted EBITDA of around $450 million to $460 million.
The firm said it completed sale of EthosEnergy for net cash proceeds of $138 million.
Wood reported net debt excluding leases at December 31, 2024, of around $690 million (31 December 2023: $694 million) and average net debt in 2024 of $1.1 billion.
On the Deloitte review, Wood added: “The review is continuing and Deloitte’s work and assessment will need to be complete before any conclusions can be reached. However, significant work has been undertaken and based on that …
“The company does not expect that the findings of the review will have a material impact on the group’s cash position or its ability to generate cash in the future …
“Following provisional indications from the review, the company is evaluating the extent of prior year adjustments which the company expects will be required in relation to the Projects business unit and their impact on previously reported adjusted EBITDA for FY23 and any prior periods …
“The company is initiating steps to strengthen significantly the group’s financial culture, governance and controls in light of material identified weaknesses and failures …”
On its refinancing, the company said: “As previously disclosed, the majority of the group’s debt facilities mature in October 2026 …
“We are therefore undertaking a detailed, holistic assessment of all potential refinancing options …
“As part of this, we are engaging with the group’s lenders on these options together with any potential implications of prior year adjustments which may arise from the independent review.”
Wood CEO Ken Gilmartin said: “This is a difficult announcement amid our transformation. While we have made progress, I am disappointed in our financial performance. Consequently, we are taking decisive actions to ensure we can meet the opportunities we have in growing markets, principally energy.
“While the likely findings from the independent review are expected to have no material impact on the group’s cash position and future cash generation, it clearly gives us areas to focus on and we are initiating steps now to further improve our financial culture, governance and controls.
“We have announced further actions to address the cost base of the business to right size Wood for the future, and have laid out a very clear route to positive free cash flow in 2026.
“As we look ahead, notwithstanding the challenges today, I am confident the fundamentals of this company remain strong – we are in growing markets, with considerable in-demand engineering skills, trusted client relationships, and we’re well positioned to grow the business.”