Wood Group (John)PLC Pre-close trading update

 
TIDMWG. 
 
13 December 2017 
 
           Pre-close trading update for the year to 31 December 2017 
 
   "Focused on operational delivery and transformational change to create a 
                        platform for long term growth " 
 
Highlights: 
 
  * Acquisition of Amec Foster Wheeler completed on 9 October to create Wood, a 
    global leader in project, engineering and technical services delivery to 
    energy and industrial markets 
 
  * Integration progressing ahead of schedule with sustainable annualised cost 
    savings already achieved ahead of plan 
 
  * Currently estimate that 2017 Proforma Wood EBITA from continuing businesses 
    will be in the region of $590m to $610m 
 
  * Net debt at 31 December expected to be around $1.8bn 
 
We entered 2017 in a strong market position with a structurally lower overhead 
cost base reflecting our cautious near term outlook in our core oil & gas 
market that continued to present challenges. We retained our focus on M&A and 
accelerated delivery of our strategic objectives including broadening our end 
market exposure. Following shareholder and competition approval we completed 
the acquisition of Amec Foster Wheeler ("AFW") on 9 October 2017 to create 
Wood, a global leader in project, engineering and technical services delivery 
to energy and industrial markets. Customer reaction has been positive, we have 
momentum in contract awards and see good opportunities for future revenue 
synergies. 
 
As previously announced, full year results will be released on 20 March 2018, 
later than usual to accommodate the reporting and auditing process for the 
enlarged business. There is no change to our proportionally consolidated 
approach which includes the contribution from joint ventures.  EBITA and AEPS 
will be retained as our principal profit measures. EBITA will be stated after 
costs relating to asbestos. Reported full year actual results will comprise the 
heritage Wood Group business and a contribution from AFW for the period from 
completion on 9 October 2017 to 31 December 2017. Results will also be 
presented on a Proforma basis to provide better insight into the underlying 
continuing business performance. 
 
There have been no material developments in Wood Group's internal investigation 
into historical engagement with Unaoil since the update provided in the half 
year results. 
 
We continue to cooperate with the investigation by the SFO and voluntary 
requests for information from the DOJ and SEC regarding AFW's past use of third 
party agents. 
 
Heritage Wood Group Trading 
 
Our core oil & gas market continued to present challenges in 2017. 
 
In Asset Solutions EAAA we saw improved activity in the second half as 
expected, led by work in the Asia Pacific region including Exxon PNG and 
Malaysia and commencement of our SAGE operating partner contract with Ancala. 
In Saudi Arabia work under our GES Plus contract continues to be released at a 
slow rate. 
 
In Asset Solutions Americas, hook up and commissioning work on Hebron made a 
good contribution and reached completion in the second half. We have seen 
modest growth in US onshore construction and infrastructure work and are at an 
advanced stage of engineering delivery on our upstream greenfield projects 
including Husky White Rose, Peregrino, Leviathan and Mad Dog 2.  Performance in 
US onshore engineering has been weaker than anticipated. 
 
In Specialist Technical Solutions, automation is delivering growth but this is 
more than offset by the reduction in Subsea where activity levels are down on 
2016. 
 
Amec Foster Wheeler Integration and Trading 
 
Integration is progressing ahead of schedule with significant progress being 
made, utilising the lessons learned from the Wood Group 2016 transformation 
programme. The operating structure and executive leadership team of Wood was in 
place prior to completion and we have since announced a further two levels of 
organisational leadership. At the leadership levels alone, we have already 
delivered sustainable annualised cost savings ahead of plan since completion in 
October. We have also made good progress on real estate rationalisation, merged 
bidding pipelines and aligned tendering and delivery governance. We remain very 
confident of delivering cost synergies of over $170m by the end of the third 
year following completion. 
 
Since completion, a number of themes highlighted in the AFW half year results 
have been evident in our review of the business post close. In the second half 
we have seen a better than anticipated outcome on certain oil & gas projects, 
offset by delays and cost overruns on a small number of fixed price contracts 
in the legacy Transmission & Distribution and Environment & Infrastructure 
businesses. 
 
Wood - Reported FY 2017 Actual Results 
 
We currently estimate that 2017 full year EBITA comprising the heritage Wood 
Group business and a contribution from AFW for the period from 9 October to 31 
December will be in the region of $335m to $355m. 
 
Wood - Proforma H1 2017 and FY2017 
 
We previously outlined our approach to proforma financial metrics and segmental 
reporting1.  Proforma 2017 will include the results of AFW and heritage Wood 
Group from 1 January. It will exclude the results of businesses disposed; 
principally the AFW North Sea upstream business, the AFW North American nuclear 
operations and the disposed elements of GPG. 
 
In the first half of 2017, Wood generated EBITA of $264m from revenues of 
$4.7bn on a proforma basis. Margins continued to be impacted by challenges in 
oil & gas markets overall and the anticipated reduction in AFWs solar activity 
from record levels in 2016. These challenges were largely offset by growth 
elsewhere including Environment and Infrastructure, improvements in US offshore 
greenfield engineering and the impact of cost reduction programmes. 
 
Reflecting the current trading conditions and typical second half weighting of 
profit in both heritage Wood Group and AFW,  we currently estimate that 2017 
Proforma EBITA from continuing businesses will be in the region of $590m to 
$610m. 
 
Net Debt and Financing 
 
As expected, net debt to trailing Proforma EBITDA at completion was c. 2.2x and 
net debt was $2.0bn. The disposal of the AFW UK upstream business has reduced 
net debt by c $300m, although this is partly offset by expected transaction and 
synergy delivery costs. Net debt at 31 December is expected to be around 
$1.8bn2.  There is no change to our preferred long term capital structure and 
reducing debt to below 1.5x EBITDA remains our preferred use of free cashflow. 
 
We retain our progressive dividend policy and increased the first half dividend 
by 3%. Former AFW holders will be entitled to the full year dividend. 
 
Conference Call 
 
A telephone conference call for analysts will be held at 8:30am today; 
participant dial-in details below: 
 
UK: 0800 012 1325 
 
International: [phone] 
 
Passcode: 386005 # 
 
Note to editors: 
 
Wood is a global leader in the delivery of project, engineering and technical 
services to energy and industrial markets. We operate in more than 60 
countries, employing around 55,000 people, with revenues of around $10 
billion.  We provide performance-driven solutions throughout the asset 
life-cycle, from concept to decommissioning across a broad range of industrial 
markets including the upstream, midstream and downstream oil & gas, power & 
process, environment and infrastructure, clean energy, mining, nuclear and 
general industrial sectors. We strive to be the best technical services company 
to work with, work for and invest in. http://www.woodplc.com/ 
 
For further information contact: 
 
Wood 
 
Andrew Rose - Group Head of Investor 
Relations                                        01224 532 716 
 
Ellie Dixon - Investor Relations 
Manager                                                      01224 851 369 
 
Brunswick 
 
Patrick 
Handley                                                                                              020 
7404 5959 
 
Charles Pemberton 
 
1 We disclosed our proposed operating structure in August. Proportionally 
consolidated EBITA and AEPS remain our principal profit measures. Wood has four 
reportable segments, Asset Solutions (Americas), Asset Solutions (EAAA), 
Specialist Technical Solutions and Environment and Infrastructure Solutions. 
Revenue, EBITA, Margin and headcount will continue to be disclosed for our 
Reportable Segments.  In addition our presentation on Financial Metrics and 
Segmental Reporting in November can be found here. ( https://www.woodplc.com/ 
__data/assets/pdf_file/0014/32720/ 
2017-financial-reporting-and-revised-segments-analyst-update.pdf ) 
 
2 For the purpose of comparing net debt at 31 December 2017 to EBITDA, 
estimated 2017 proforma EBITA in the region of $590m to $610m should be 
adjusted by an amount of around $100m to calculate EBITDA. 
 
 
 
END 
 

(END) Dow Jones Newswires

December 13, 2017 02:00 ET (07:00 GMT)