Wood Group swings to net profit as costs fall
Robin Watson: modest growth
Oil services company Wood Group posted a swing to net profit in 2019 despite a decline in revenue from continuing operations, as the company booked lower exceptional costs over the year.
The energy-services group made a net profit of $72.0 million in 2019, compared with a net loss of $8.9 million in 2018, but below the market forecast of $170.1 million–taken from FactSet and based on three analysts’ forecasts.
Pretax profit from continuing operations was $148.7 million, up from $53.5 million in 2018, as exceptional items fell 31% to $127 million.
Operating profit–one of the company’s preferred metrics–rose 84% to $303 million, although below market consensus of $333 million taken from FactSet and based on forecasts from five analysts. However, the company noted that both adjusted earnings before interest, taxes, depreciation and amortization and operating profit before exceptionals were in line with guidance.
Revenue fell 1.2% to $9.89 billion dragged by the Asset Solutions unit in Europe, Africa, Asia and Australia and the Technical Consulting Solutions business. The group’s order book at the end of the period was $7.90 billion.
Wood recommended a final dividend of 23.9 cents a share bringing the full-year payout to 35.3 cents–up from 35.0 cents in 2018.
As for 2020, the company expects “modest underlying revenue growth and growth in underlying Ebitda, underpinned by margin improvements,” it said. However, these projections don’t take the effect of coronavirus and recent falls in oil prices into account as it is too early to quantify, Wood said.
David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Wood has delivered a robust set of results against a challenging 12 months for the business. The company has taken proactive steps to broaden its offering and focussed on debt reduction, supported by a targeted divestment programme.
“The benefits of its merger with Amec Foster Wheeler are still filtering through and there are more challenges ahead – not least the plunge in oil prices of the last few days – but Wood has relatively good visibility over future revenues and is in a decent position to grow in its other markets, while keeping leverage under control.”