Strong order book sets Wood on path to H2 growth
Wood expects an improved second half
Energy services company Wood reported good growth in its order book, up by 18% to $7.7bn in the year to date, underpinning confidence of a return to growth and the delivery of a stronger second half.
First half earnings were in line with guidance, reflecting improving momentum in Q2. There was strong margin improvement as delivery of efficiencies and improved project execution more than offset lower activity.
The Aberdeen-based company saw revenue fall 22.9% to $3.1bn and reported an $11m bottom line loss, equal to last year. Operating profit came in at £68m, against £66m last time.
The company did not declare a dividend.
Robin Watson, chief executive, pictured, said: “The first half of 2021 reflects improving momentum in activity in Q2 and a strong margin improvement, with increased margins in all business units and a greater weighting of high margin Consulting activity.
“Trading momentum and good growth in our order book, which is up c18% year-to-date, underpin our confidence in delivering a stronger second half which will reflect a return to growth compared to both H1 2021 and H2 2020, and further growth in our full year adjusted EBITDA margin.”
AJ Bell financial analyst Danni Hewson noted the falling half year revenue, adding: “More encouraging were the forward-facing metrics like order intake which suggest business is beginning to pick up. Margins are also improving but debt remains elevated, and ticked up uncomfortably in the period.
“As a results the company still appears to be some way of being able to resume dividends, arguably investors would be better served by Wood Group investing to secure its long-term future.
Robin Watson: confidence (pic: Terry Murden)
“After all a further complicating factor for the business at present is the transition away from fossil fuels which may also be having a chilling effect on new oil and gas developments.
“The good news for Wood Group is that it has the opportunity to respond to this transition and apply its transferrable skills to the renewables space and other cogs in the decarbonisation wheel.”
Stuart Lamont, investment manager at wealth manager Brewin Dolphin, said: “Today’s update from Wood shows the company is on a positive path towards recovering from the impacts of Covid-19 with long-term contracts being renewed and continuing momentum for the consulting division.
“Its order book is up 18% since the turn of the year, and while revenue is down 22.9%, growth looks set to be on the agenda for the next six months.
“Although there was a modest rise in debt levels this is expected to fall in the second half as weaker projects are offset by higher margins in consulting and growth in operations.”