Wood prepares for delays as order book slips
Robin Watson: ‘continuing to win work’ (pic: Terry Murden)
Energy services company Wood said its order book had slipped and it was prepared for further delays and postponements because of the pandemic.
Adjusted Ebitda was down 19% and like-for-like revenue 11% in the first half while the $7 billion order book was also down 11% since December.
During April and May, the Aberdeen-based company booked new orders of $1.3bn including; engineering, procurement and construction work for GSK, onshore wind and solar EPC awards in the US, EPCm to increase production of an oilfield in Iraq, and an LNG renewal in Asia Pacific.
It also secured a five-year framework agreement with the US Navy for engineering, design and maintenance of fuel installations.
Strategy to broaden the business has been reflected in the company’s changing profile. Renewables activity is up 4% and upstream & midstream activity down 5%.
In a trading update it said: “In the first half we have seen the effect on our business of the unprecedented events of Covid-19, its impact on the global economy, and significant levels of oil price volatility.
“This has reinforced our view that our strategy to substantially broaden our consulting, projects and operations business across diverse energy and built environment markets has been the right one.
“Typically, around 80% of our full year revenues are either delivered or secured at this point in the year. However, in 2020 the risk of further delays and postponements persists and we are prepared for a wider range of outcomes depending on activity across our broad end markets.
“Our completed actions to protect margin give us confidence in delivering significantly stronger margins in the second half.”
Robin Watson, chief executive, said: “Despite the disruption, we are continuing to successfully win and execute work, supported by our strategy of broadening the business across the global energy market & the built environment.
“The relative strength we are seeing in chemicals & downstream, the built environment and renewables, where we will double our revenues in 2020, is helping to mitigate the impact of challenging conditions in upstream and midstream oil & gas.
“We have a proven track record of leveraging our flexible, asset light model at pace to protect margin and in Q2 completed the actions required to deliver overhead cost savings of over $200m in FY 2020”.
The company said it ha a strong balance sheet and liquidity and expects net debt at 30 June to reduce from $1.43bn at December 2019 following Q1 disposals.
David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Wood has remained relatively resilient against a very challenging backdrop – the effects of Covid-19 on the oil and gas market has underlined the importance of the business’s decision to diversify its offering.
“First half revenues are expected to decline around 11%, but it has good visibility over future revenues and even won new orders at the height of the crisis in the UK, during April and May.
“Debt remains a key focus and it is reassuring to see Wood expects to reduce this by the end of the year, helped by disposals and cost reductions. Nevertheless, Wood’s fortunes are still largely tied to the direction of the oil price, and there is likely to be more volatility ahead.”