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Wood’s progress a reason for Apollo’s bid interest

Keith Gilmartin
Ken Gilmartin: delivering on the strategy

Strong revenue growth and a solid pipeline of orders have shown why a US private equity firm was keen to get its hands on Aberdeen-based Wood Group, says an analyst.

Apollo Global Management made several approaches for the energy services company earlier this year but each one was rejected by the Wood board.

Its final rejection of a proposed a 240p a share deal valuing the company at £1.7bn forced Apollo to withdraw in mid-May.

In a trading update today, Wood’s CEO Ken Gilmartin said “good progress” is being made as the board said it expects a 15% rise in revenue to c.$2.9 billion when it reports half-year half year results on 22 August.

Adjusted EBITDA of c.$195 million is up around 6% and headcount by 5% to around 35,600.

Significant contract wins in the period to the end of June include a c.$250 million operations renewal, a significant life sciences contract in the US and a large minerals contract in Europe.

Mr Gilmartin said: “We are making good progress in delivering on the growth strategy we outlined last November.

“Trading shows continued good growth and margins in line with our expectations. We have won a number of significant contracts in energy, minerals and life sciences during the period, all testament to the exciting position Wood holds in its key growth markets.

“As we look ahead, we are confident of our delivery both for the full year and medium term, including a return to generating positive free cash flow”.

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “Today’s results from Wood will be closely watched, after the takeover by Apollo fell apart earlier this year.

“Strong revenue growth, a robust project pipeline, and an expected return to positive free cashflow in the second half of the year are indicators of why the private equity group offered 240p per share, when Wood currently trades at nor far off half that price.

“But shareholders will want to understand what the plan is from here in future updates, now that the company looks likely to remain on the public market and another bid from a potential suitor is yet to materialise.”

Shares closed unchanged at 139p.

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