Wood Group (john) Share Discussion Threads

[hazl] 05/11/2024 20:26

9 Posts today 10 yesterday....just saying.

I did thank you initially because you have been in the field.

[pogue] 05/11/2024 18:29

I am not in this share Hazl short or long. Protest elsewhere. I discuss things on threads whether I hold or not. Doing same on EML got out of that on the drop.

[hazl] 05/11/2024 18:19

Whilst you have a natural interest pogue I think you 'doth protest too much' if I might say.

[pogue] 05/11/2024 14:43

hazl
from experience of working in EPCs all my life I can tell you reducing manpower means the final design suffers. The client then back charges you to fix it and again from experience changes are very costly as in an engineering design changing one bit effects so many others. See PFC if you want to see what happens when you cut corners.

They are only going back 4 years hzl read my earlier posts. It seems that's as far back as HMRC goes unless its a fraud investigation. Since WG are putting thier hands up I am assuming they are not being done for fraud just paying for bad legal advice.

If the projects were large FEEDs, which I think they were, and are going forward, then the profit is in the manhours as there is no equipment/procurement so paying 20% VAT that was not included will wipe out the profit margins which are way below 10%.

Their turnover is large, but profits low, so a £10 million loss now and more probably in the future should not matter so much.

Good luck holding currently its boom time for EPCs the booms dont last as long as they used to though the old 7 year cycle has been long broken.

[hazl] 05/11/2024 13:23

My goodness me!

Whilst it is fresh news it isn't the total picture.


I agree with Willie was it... and will wait to see what occurs on the 7th.
They are obliged to reveal the situation and we ought to get some figures.


If pogue,who has knowledge,yes, but no shares believes let me quote

'I dont think its that big a hole the worry would be the contracts they are currently working on and how they choose to run them. Will they take the hit on VAT or will they cut manpower?'

Then, if it's not such a big hole, wait and see, for me. I imagine they can only take them back so many years.
Then the next move might be to reduce manpower, I don't know, but shares usually respond well if you reduce costs.


DYOR
IMO

[chutes01] 05/11/2024 12:51

I’ve said all along they are incompetent chancers lining their own pockets

[pogue] 05/11/2024 12:30

Willie99
exactly. They had a cunning plan it failed. It does question management's professional view on things though I agree.

[willie99] 05/11/2024 12:01

Most of the UK Tier 1 EPCs have been doing work for Saudi, (and other ME countries which don’t have VAT) for decades. All of the EPCs should therefore know the VAT implications of such work, and organise their commercial affairs appropriately.

If Wood had to seek legal advice on the their VAT arrangements, it suggests they were trying to do things differently from the standard approach. I don’t know why they went down this route, but i imagine they thought it would save them money. It appears that HMRC have found them out, and it will probably cost them money now.

Not the behaviour you would expect from a professional EPC.

[pogue] 05/11/2024 11:40

Gargolye
I believe the problem is that the contractors are working in a UK office and charging them via an offshore company is not legal. If it was legal all the EPCs would do it.

[pogue] 05/11/2024 11:38

I dont think its that big a hole the worry would be the contracts they are currently working on and how they choose to run them. Will they take the hit on VAT or will they cut manpower?

[gargoyle2] 05/11/2024 11:36

Why didn't Wood have the contractors contracting to an offshore Wood Group entity (Wood UAE, for example), then the VAT issue wouldn't have arisen in the first place.

[willie99] 05/11/2024 11:25

Pogue… good point…and I don’t have an answer to it. As a long term holder I’m hoping that this isn’t another financial hole for the company, as they have had more than their fair share of financial problems, most of them self inflicted.

[pogue] 05/11/2024 11:10

If HMRC would reimburse the VAT to Wood why did Wood introduce the scheme to not pay the contractors VAT? Easier to just speak to HMRC in the first place.

[willie99] 05/11/2024 11:05

I understand that Wood will have to pay the VAT that each contractor invoices for, however, since the ultimate Saudi customer is outside the UK, Wood cannot charge VAT to the customer.

So, rather than Wood loose out, will HMRC not just reimburse the VAT to Wood. VAT is a bit of circular process, but it only works if the ultimate customer (in this case, the Saudi companies) also pay VAT. It doesn’t seem fair that Wood should pay the VAT, if they can’t recover the tax from their customer.

Im sure Thursdays statement will clarify, either positively or by its silence on the matter.

[pogue] 05/11/2024 10:17

Fag packet calc I reckon £10 million ballpark cost based on 100 contractors for 4 years at £24000 VAT to be refunded per contractor. I am not sure how big those Saudi projects were and how many but they were working for 4 years on them at least so 100 feels about right. Not sure if WG can claim some of that back from the VAT office but assume they had enough VAT to claim back from other projects to cover their VAT costs. Anyone who was there can correct me.
Going forward I assume they will fire people to keep the projects on course costwise what that might do to quality and thus rework costs is the question.

[hazl] 05/11/2024 09:47

I am looking to the future here.
These are difficult times which have already sent shares up and down everywhere.
Volatility will be abundant.

What's right for me might not be right for everyone else of course.
I am trying to find a few for a hopeful future recovery.

[hazl] 05/11/2024 08:19

Sorry trading update on the 7th I have in my diary.


right .

Back in August they have said they will have significant cash flow so let's hope they weather any storm.



'Reconfirmed 2024 outlook

· High single digit growth in adjusted EBITDA, before the impact of disposals

· Performance will be weighted to the second half, reflecting the typical seasonality of our business and the phasing of the in-year benefit of the Simplification programme

· Operating cash flow to continue to improve, partly through improved cash management across our business, especially given the second half weighted revenue profile of the Group this year. Exceptional cash outflows will be around $125 million, of which c.$50 million relate to our Simplification programme to deliver around $60 million of savings from 2025, and now include c.$6 million of Sidara-related costs

· Net debt at 31 December 2024 is expected to be at a similar level to 31 December 2023 after the proceeds from planned disposals, which are due to complete in the second half of this year



Reconfirmed 2025 outlook

· Adjusted EBITDA growth in 2025 above our medium-term targets, with the c.$60 million of annualised Simplification benefits on top of the originally targeted mid to high single digit growth

· We expect to generate significant free cash flow in 2025'.

[theoriginalwonderstuff] 05/11/2024 08:11

How/What do you mean, hazl?

[hazl] 05/11/2024 08:07

WG. Has already lost a lot so I am happy to wait until then.

[hazl] 05/11/2024 08:06

I am looking forward to results on the 7th chutes if that's what you meant.

[chutes01] 04/11/2024 18:28

So news tomorrow

[pogue] 04/11/2024 17:53

You would have thought so. The emails went out today to the contractors affected. I don't know when the court case result came out.

[willie99] 04/11/2024 17:22

If this Vat issue has a material impact on their profit, they are obliged to update the market in a timely manner, with a profit warning. Thursdays trading update will be interesting.

[pogue] 04/11/2024 17:05

Re the legal test this VAT issue came to a head after a contractor took Wood to court on the topic and won I am told. Wood are paying out immediately on invoices for the past 4 years they are not doing this because it might not be illegal I suggest they are certain.

[pogue] 04/11/2024 17:03

I cannot say for certain Wood bid with no VAT but I am pretty sure they did not account for it when calculating costs of paying their contract engineers as they did not allow them to apply VAT to their invoices as they ran the internal agency that generated their invoices, another very odd practice not allowing contractors to write their own invoices.
No other UK contractor is bidding without VAT I suggest as only Wood had the legal counsel advice saying it was safe to do. I know of no other EPC that is stopping their contract engineers from putting VAT on their invoice.