Margin drive

Wood launches $60m annual savings programme

Keith Gilmartin
Ken Gilmartin: significant progress

Energy services company Wood Group has is targeting annualised savings of around $60 million from 2025 after announcing strong revenue and improved cash flow, but higher than expected losses for the year to the end of December.

A new “Simplification Programme” will seek $10m in the first year in order to drive margin growth.

Adjusted EBITDA of $423 million was up 9% on last year (+11% at constant currency) with good growth across all business units, but there was a statutory loss of $105m, down from $352m.

An operating profit of $38m was offset by finance costs and tax. There were exceptional items of $77 million, including a $45 million charge relating to a receivables write-down and an arbitration claim in the now closed Power and Industrials EPC business. There were also $29 million of charges relating to an asbestos liability.

In view of the higher than expected losses the shares closed down 10.25p, or 7%, at 138p.

The company said the sale process for EthosEnergy is progressing well, and smaller disposals are expected to follow.

Ken Gilmartin, CEO at the Aberdeen-based company, said: “We made significant progress in this first year of our three-year growth strategy. We delivered strong revenue and adjusted EBITDA growth, and we significantly improved operating cash flow.

“We continue to see clear business momentum, with a higher order book, double-digit growth in our pipeline and positive pricing trends in both pipeline and order book.

“It is encouraging that the fastest growing parts of Wood are the higher-margin Consulting business, and our sustainable solutions across all areas.

“To build on this early success and further enhance our strategic delivery, we have launched a simplification programme to drive efficiency and support further margin expansion.

“We are therefore upgrading our outlook, with 2024 guidance now towards the top end of our medium-term targets and 2025 expected to exceed those targets. Ultimately, our priority remains sustainable cash generation and we expect to deliver significant free cash flow from 2025.”

The order book was up 4% to $6.3 billion, and by 7% on a like-for-like basis.

Arvind Balan will join Wood as chief financial officer on 15 April, replacing David Kemp who will retire from the board but will remain with Wood for a period of time to ensure a smooth transition.

Market reaction

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “There is a degree of pressure on Wood to deliver after knocking back bids to take the company private last year.

“Although today’s results paint a mixed picture, Wood has come out fighting and there are some tentative reasons for optimism. Losses have narrowed and there is some good momentum behind earnings, with the company’s guidance upped for the year ahead.

“Wood’s end markets are also generally in better shape, while divestments will help to simplify the business and free up capital to be allocated to more profitable divisions. Wood has been a company in transition for some time now – there is some good news today, but it will likely take much more of a catalyst to get the share price heading in a more positive direction.”

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