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WG. Wood Group (john) Plc

147.00
-1.00 (-0.68%)
26 Apr 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Wood Group (john) Plc LSE:WG. London Ordinary Share GB00B5N0P849 ORD 4 2/7P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.00 -0.68% 147.00 147.40 147.90 149.50 144.60 144.60 1,924,201 16:35:18
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Engineering Services 5.9B 464M 0.6707 2.20 1.02B

Wood Group (John) PLC Trading Update for the six months ended 30 June 21 (9195C)

24/06/2021 7:00am

UK Regulatory


Wood Group (john) (LSE:WG.)
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From Apr 2021 to Apr 2024

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TIDMWG.

RNS Number : 9195C

Wood Group (John) PLC

24 June 2021

24 June 2021

This announcement contains inside information

John Wood Group PLC ('Company')

LEI: 549300PLYY6I10B6S323

Trading Update for the six months ended 30 June 2021

"Following a steady start in Q1, we have seen improving momentum in activity in Q2 with growth in Consulting and Operations compared to Q2 2020. We expect to deliver strong margin improvement compared to H1 2020, with a greater weighting of high margin Consulting activity and margin improvement across all business units. Our full year outlook is unchanged with trading momentum and growth in our order book, which is up c6% year-to-date driven by Consulting and Operations, giving us confidence that the group will return to growth in the second half, compared to both H1 2021 and H2 2020. In line with our strategic objective we anticipate growth in EBITDA margin. "- Robin Watson, Chief Executive

H1 Highlights: Strong margin improvement offsetting lower activity

 
 --   Revenue on a like for like basis(2) of c$3.2bn, down c21% on H1 
       2020 due to impact of Covid-19. Robust Consulting activity and 
       relative resilience in Operations partly offsetting lower activity 
       in Projects 
 --   Improving momentum in activity in Q2; growth in Consulting and 
       Operations compared to Q2 2020 
 --   Adjusted EBITDA will be $255m to $265m, down c12% on H1 2020 on 
       a like for like basis 
 --   Adjusted EBITDA margin, on a like for like basis, will be 8.0%-8.3% 
       up 60-90bps on H1 2020; driven by improved margins in all Business 
       Units including significantly improved margins in Projects and 
       a greater weighting of high margin Consultancy activity 
 --   Future Fit programme being delivered at pace: c$20m efficiencies 
       delivered in H1 
 --   Operating profit before exceptionals will be around $85m to $95m 
 --   Order book at end of May of c$6.9bn, up c6% on December 2020; good 
       growth in Consulting and Operations. Anticipate order book growth 
       in Projects in H2 
 --   Expected net debt(3) at 30 June 2021 of around $1.15bn; reflecting 
       unwind of advance payments in H1, which is anticipated to reverse 
       in H2 in line with growing Projects order intake and resulting 
       advances build 
 --   Confident in delivering stronger H2, returning to growth relative 
       to both H1 2021 and H2 2020. Full year outlook unchanged. Increased 
       activity in Consulting and growth in Operations expected to partly 
       offset lower activity in Projects. 
 --   Full year EBITDA margin to grow as we progress towards our medium-term 
       target of 9.6% 
 
   Consulting   (c30% of Revenue) 

Revenue: c$0.9bn, in line with H1 2020 on a like for like basis(4) , reflecting strength in built environment activity and robust energy activity, and also driven by increased activity levels in Q2 compared to the prior year.

Adjusted EBITDA: Up modestly on H1 2020(4) , with c60bps margin improvement to c11.8%, due to robust activity levels, maintaining utilisation at high levels and efficiency improvements.

Order book progression: Good growth in order book(5) , up c13% compared to December 2020. Recent awards reflect our strategic positioning for growth opportunities from the energy transition and drive for sustainable infrastructure including:

 
 --   Owner's engineer scope for Europe's largest single-site onshore 
       windfarm 
 --   Pre-Front End Engineering Design (Pre-FEED) work to support ADNOC's 
       plans to advance a world-scale blue ammonia facility for low-carbon 
       fuel production 
 --   A scope to develop a road-map for a net-zero transit network in 
       Canada 
 --   We have also recently entered into an agreement with a long-standing 
       partner to jointly create a solution utilising hydrogen to produce 
       renewable diesel and sustainable aviation fuel 
 
   Projects   (c40% of Revenue) 

Revenue: c$1.2bn, down c40% on H1 2020(4) . Lower activity driven by larger engineering, procurement and construction (EPC) contracts completing as expected and new awards in process & chemicals and conventional energy being limited to smaller, early-stage scopes.

Adjusted EBITDA: Down on H1 2020(4) . Significant margin improvement, up over 220bps to c7.5% as a result of improved project execution, delivery of efficiencies from our Future Fit programme and maintenance of utilisation at high levels, offsetting the impact of lower activity.

Order book progression: Order book(5) down c15% compared to December 2020 reflecting the completion of larger contracts in process & chemicals. An encouraging increase in bidding and opportunities supports our expectation of order book growth throughout the remainder of the year. While new awards to date have been limited to smaller, early-stage scopes, they reflect our strategy of broadening the business across diverse energy markets and include:

 
 --   Pre-FEED analysis on a CO(2) pipeline network for a carbon capture, 
       transportation and sequestration project connecting a number 
       of locations across North America 
 --   An EPC services contract with Sinopec to expand its refinery 
       development in China 
 
   Operations   (c30% of Revenue) 

Revenue: Relatively robust revenue of c$1.0bn, down c8% on H1 2020 on a like for like basis(4) . Reflects the impact of lower Q1 2021 activity due to the impacts of Covid-19 and oil price volatility, particularly in conventional energy, largely offset by an improved Q2 2021 compared to the prior year as markets stabilised.

Adjusted EBITDA: Broadly in line with H1 2020 on a like for like basis(4) with a 50bps improvement in margin to c10.5%. Margin improvement reflects efficiencies from our Future Fit programme and good execution.

Order book progression: Order book(5) up c14% compared to December 2020 reflecting a recovery in demand in conventional energy and growth in process & chemicals . Recent awards reflect our broad energy end market exposure and build on our strong customer relationships in conventional energy, including:

 
 --   A five-year integrated facilities services agreement with TAQA 
       in the North Sea to optimise operations and extend production life 
 --   EPC solutions for a hydrothermal recycling facility 
 --   A framework agreement with NEL Hydrogen for engineering and project 
       management services to support the delivery of large-scale green 
       hydrogen production plants 
 

Centre and Investment Services

Revenue in Investment Services will be up on H1 2020(4) , while EBITDA will be a loss of around $7m reflecting additional costs to complete certain legacy projects.

Future Fit: Accelerating our strategy at pace

We have made strong early progress in the delivery of our 18-month long Future Fit programme. With a focus on accelerating our strategic priorities to unlock stronger medium-term growth, deliver efficiency and create value, in H1 2021 we have delivered:

 
 --   A service-defined operating model, optimised to unlock growth opportunities 
       by leveraging global client relationships across the entire asset 
       life cycle of Consulting, Projects and Operations 
 --   The successful launch of a range of Operational Excellence initiatives 
       to enhance core skills and competencies, ensure consistent project 
       outcomes and accelerate our readiness for future skills requirements 
 --   Efficiency savings of c$20m 
 

We look forward to updating further on this important initiative with our interim results.

Balance sheet and liquidity

In 2020, against the backdrop of unprecedented trading conditions we delivered a significant reduction in net debt to $1.01bn at 31 December 2020. We expect an increase in net debt at 30 June 2021 to around $1.15bn driven by:

 
 --   The timing of advance payments, with the roll off of large EPC 
       contracts contributing to a working capital outflow in H1, which 
       is anticipated to reverse in H2 as advances build in line with 
       order book in Projects throughout the remainder of the year 
 --   Exceptional costs of c$35m including costs to deliver our Future 
       Fit programme 
 

The ratio of net debt excluding leases to adjusted EBITDA (pre-IFRS 16) will be around 2.5x at 30 June 2021 (31 December 2021: 2.1x). We expect the ratio to reduce in H2, in line with increased profitability driven by the weighting of our earnings to H2 as improving momentum in market conditions continues in the second half of 2021. We retain considerable levels of financial headroom. Undrawn facilities are around $1.6bn and covenants are set at 3.5x pre-IFRS 16 EBITDA.

Update on investigations

We continue to anticipate that settlement of the investigations by the UK Serious Fraud Office (SFO) and by the authorities in the US and Brazil will be finalised, subject to court approvals, during Q2 2021. It is expected that approximately $60m of the settlement amounts will be payable in H2 2021, following payments in H1 related to the settlement of the investigation by the Scottish authorities in March of c$10m. The remaining $126m payable is expected to be payable in instalments in 2022, 2023 and 2024.

Full year outlook: improving activity and order book growth underpinning stronger H2

Improving activity levels and order book growth underpin our confidence in the delivery of a stronger second half, with the group returning to growth relative to both H1 2021 and H2 2020. Our outlook for the full year remains unchanged.

 
 --   Improving momentum in activity levels in Q2 2021 with growth 
       in Consulting and Operations compared to Q2 2020 
 --   Order book at the end of May of $6.9bn, up c6% on December 2020 
       with good growth in Consulting and Operations. Improving outlook 
       in Projects supporting anticipated order book build in H2 
 --   Outlook for FY2021 remains unchanged: 
      Lower activity expected overall. Increased activity in Consulting 
       driven by continued strength in built environment activity; lower 
       activity in Projects driven by larger contracts in process & 
       chemicals completing and growth in Operations driven by a recovery 
       in demand in conventional energy and growth in process & chemicals 
      EBITDA margin improvement, as we progress towards our medium-term 
       target of 9.6%. This will be driven by maintained high utilisation, 
       improved project execution, efficiency improvements including 
       $40m of efficiency savings from our Future Fit programme, and 
       our business mix weighted more towards higher margin Consulting 
 

Notes:

1. All figures in this trading update are unaudited.

2. Revenue on a like for like basis is calculated as revenue less revenue from disposals executed in 2021 and adjusted EBITDA on a like for like basis is calculated as adjusted EBITDA less the adjusted EBITDA from those disposals. These amounts are presented as a measure of underlying business performance excluding businesses disposed. In H1 2021 executed disposals consisted of our joint venture interest in Sulzer Wood. Comparative figures also exclude revenue and adjusted EBITDA from the disposals of our nuclear and industrial services businesses, YKK and our joint venture interest in TransCanada Turbines completed in 2020. These disposals accounted for $nil revenue in H1 2021 (H1 2020: $74m) and adjusted EBITDA of $nil (H1 2020: $9m).

3. Net debt is stated excluding liabilities related to leases, including those recognised under IFRS 16 .

4. Details of H1 2020 Revenue and EBITDA, on a like for like basis, recalculated as if the new operating model were in place from 1 January 2020 are shown below for illustration purposes :

 
                                  Consulting              Projects              Operations              IVS                Centre              Total 
            Revenue 
             ($m)                 913                     1,954                 1,080                   64                 -                   4,011 
            EBITDA 
             ($m)                 102                     103                   108                     15                 (32)                296 
            EBITDA 
             margin               11.2%                   5.3%                  10.0%                   23.4%              n/a                 7.4% 
 

5. Order book as at 31 December 2020 recalculated for the new operating model is shown below for illustration purposes:

 
                                Consulting              Projects              Operations              IVS              Total 
            Order 
             book 
             ($m)               1,766                   1,787                 2,835                   136              6,524 
 

6. Company compiled, publicly available consensus comprises 9 analysts who have published estimates since our Full Year Results for the year ended 31 December 2020 issued on 16 March 2021. Consensus includes: Barclays, RBC, Bank of America Merrill Lynch, Berenberg, UBS, Citigroup, HSBC, Kepler Cheuvreux and Jefferies.

Consensus 2021 revenue is $7.2bn (range: $7.0bn to $7.4bn), consensus adjusted EBITDA is $616m (range: $596m-$634m), consensus operating profit (pre-exceptional items) is $214m (Range: $191m-$232m) and consensus AEPS is 23.1c (Range: 16.1c-30.7c).

( www.woodplc.com/investors/analyst-consensus-and-coverage )

Conference call

A telephone conference call for analysts will be held at 8.30am today; participant dial-in details below:

Dial in details:

UK: 0800 279 6619

International: +44 2071 928 338

Conference ID: 1384414

You can also listen to the call via an audio-only webcast using the link below:

https://edge.media-server.com/mmc/p/rnzojfw8

Notification authorised by:

Martin J McIntyre

Group General Counsel and Company Secretary

Note to Editors:

Wood is a global leader in consulting and engineering across energy and the built environment, helping to unlock solutions to some of the world's most critical challenges. We provide consulting, projects and operations solutions in more than 60 countries, employing around 40,000 people.

www.woodplc.com

 
 Wood 
 Ellie Dixon - Acting President 
  Investor Relations               01224 851 369 
 
 Citigate Dewe Rogerson            020 7638 9571 
 Kevin Smith 
 Chris Barrie 
 

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END

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June 24, 2021 02:00 ET (06:00 GMT)

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