In the six months to 30 June, operating profit before exceptional items fell 8.9% to $41m, with revenue down 0.4% to $2.6bn. The consulting division saw revenues rise 2% thanks to increased demand for the company’s energy solutions, while the operations segment saw revenues grow 18%, supported by an improved market for oil and gas.

Wood Group reiterated its FY22 guidance for revenue of between $5.2bn and $5.5bn and adjusted earnings before interest, tax, depreciation and amortisation of $370m to $400m.

Ken Gilmartin, CEO, said:
“Since becoming CEO in July, I have been really encouraged to see the improving operational momentum across our business, including some great client wins. The strong order book gives me confidence for the future but there is a lot more to do on cash generation and this is our top priority.

“We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow. We perform complex work in critical industries and our outstanding technical expertise and strong long-term client relationships position us well for growth across targeted markets. We have the consulting and engineering capabilities to help the world solve the global challenges of energy security, decarbonisation and energy transition. I look forward to sharing our plans at our capital markets day in November.

“In the meantime, we are focused on our culture and energising our people, performance excellence and strengthening our balance sheet through the completion of the sale of the Built Environment business, which we expect around the end of Q3”.

HY22 financial highlights

• Revenue (continuing operations) flat with growth in Operations (+18%) and Consulting (+2%) offset by the expected decline in Projects (-15%)
• Adjusted EBITDA (continuing operations) down 5%, with a robust performance in Consulting offset by a decline in Projects and Operations. Improved performance in Investment Services
• Margin (continuing operations) down 0.4ppts including the impact of the anticipated lower margin in Operations and a slightly lower margin in Consulting, both offsetting higher margins in Projects
• Exceptional items (continuing operations) pre interest and tax of $11 million (HY21: $15 million) including restructuring costs and an asbestos credit
• Adjusted diluted EPS of 5.7c down 36% reflects the lower EBITDA and higher finance expenses
• Free cash flow (including discontinued operations)of $(363) million includes a working capital outflow of $208 million and exceptional cash costs of $102 million, including the scheduled SFO settlement payment and costs associated with previously provided for loss-making contracts, principally Aegis

Sale of Built Environment Consulting to WSP Global expected to complete around the end of Q3

• Enterprise value of $1.81 billion, representing an EV multiple of 16x (incl. expected standalone costs)
• Net cash proceeds expected to be around $1.62 billion after working capital adjustments, tax and transaction costs
• Will transform balance sheet: the immediate use of proceeds will be to reduce the Group’s net debt

Balance sheet

• Net debt (excluding leases) of $1,756 million at 30 June 2022 reflects the negative free cash flow in the period
• Net debt / adjusted EBITDA (excluding leases) at 4.2 times at 30 June 2022, below our covenant levels currently set at 4.5x for the June 2022 and December 2022 measurement dates (which revert back to 3.5x thereafter)
• Provisions: the trial for the legacy lawsuit with Enterprise, related to a chemical plant in Texas, started in April 2022 and has concluded, with a decision expected by year end

Operational momentum

• Order book (continuing operations) up 5% to $6.4 billion with strong growth in Consulting (+16%) and Projects (+24%) partially offset by a decline in Operations (-6%), where the prior year benefited from significant multi-year orders
• Continue to de-risk our contract portfolio with 80% of Group revenue (continuing operations) now from reimbursable work (HY21: 75%) and only c.3% from lump sum turnkey contracts (FY21: c.6%)
• Multiple key contracts awarded in the period across all three business units, including a 10-year strategic partnership with Chevron
• Contracts wins across energy transition and decarbonisation worth over $500 million so far in 2022

Outlook for 2022

• As stated previously, we expect higher revenue across our business this year and an improved performance in the second half, helped by an improvement in our Turbines joint ventures
• At 30 June 2022, revenue in our order book (continuing operations) for the second half of 2022 was
• $2.5 billion, an increase of 9% compared to the prior year equivalent figure of $2.3 billion.
• Our guidance for FY22, excluding Built Environment Consulting, is:
• Revenue between $5.2 billion and $5.5 billion
• Adjusted EBITDA between $370 million and $400 million

Strategy update

• We are updating our strategy, based on the strong foundations of Wood. We have unique consulting and engineering skills that are critical to solving the global challenges of energy security, decarbonisation and energy transition
• We will hold a Capital Markets Day on 29th November 2022 to outline our updated strategy in detail

In the meantime, near-term priorities are:

• Completing the sale of Built Environment Consulting
• Strengthening our balance sheet and restoring financial flexibility
• Focusing on our culture and energising our people
• Defining our priority growth markets
• Improving operational delivery and consistency
• Addressing our remaining legacy issues

KeyFacts Energy Industry Directory: Wood