Confidence in outlook
Wood cuts debt after selling nuclear business to Jacobs in £250m deal
Robin Watson: ‘substantial progress’ (pic: Terry Murden)
Energy services company John Wood Group is selling its nuclear business to a subsidiary of Jacobs in a £250 million cash deal.
The deal is subject to Competition and Markets Authority approval which is expected in the first quarter of 2020. Jacobs will pay £7.5 million to Wood if the deal is not cleared by the CMA.
Proceeds from the sale will be used to reduce debt and will enable Aberdeen-based Wood to take a significant step towards achieving its target leverage policy.
It represents a multiple of approximately 12.4x based on 2018 EBITDA of £20.2 million.
David Kemp, Wood’s chief financial officer, said: “The sale of our nuclear business follows other recent divestments and marks a significant step towards achieving Wood’s target leverage policy. Although our nuclear business is a strong UK player and has performed well, we see better opportunities to develop clear global leadership positions across other parts of our business.”
The Wood nuclear business designs, delivers and maintains strategic and complex nuclear assets for customers primarily in the UK. In 2018, the profit before tax for the year amounted to $14.2m and gross assets at year-end amounted to $464m.
The sale was announced alongside half-year figures showing adjusted EBITDA increased by 7% and operating profit before exceptionals up 28%.
Robin Watson, chief executive, said the company does not see nuclear as part of its strategy.
“Strong margin improvement and profit growth in the first half was led by activities in energy markets in the eastern hemisphere and our environment and infrastructure operations in North America, together with cost synergies,” he said.
“We also made substantial progress on our non core asset disposal programme and have agreed the sale of our nuclear business for c$305m, with completion anticipated in Q1 2020.
“This will result in significant deleveraging and bring us close to our target leverage. With 87% of 2019 revenues delivered or secured we remain confident in our full year outlook and guidance is unchanged. Looking further ahead, we remain well positioned for growth across the energy and built environment markets.”
The board declared an interim dividend of 11.4 cents, up 1%.
David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Debt levels have been the main cause of concern about Wood – today’s announcement of the sale of its nuclear division will go some way towards assuaging those fears.
“Overall, it’s a positive set of results for the company after a choppy 2019 – Wood has swung back to profit and has good visibility of future earnings. Investors will have one eye on the slight fall in revenues and a marginally smaller order book, but the business remains in an encouraging position.”