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WG. Wood Group (john) Plc

132.30
-1.70 (-1.27%)
28 Mar 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
  -1.70 -1.27% 132.30 132.50 132.70 134.80 131.10 133.90 1,819,190 16:35:29
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Engineering Services 6.32B -356.3M -0.5150 -2.57 917.38M

Wood Group (John) PLC Trading Update (4359Q)

19/06/2020 7:00am

UK Regulatory


Wood Group (john) (LSE:WG.)
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TIDMWG.

RNS Number : 4359Q

Wood Group (John) PLC

19 June 2020

19 June 2020

This announcement contains inside information

John Wood Group PLC ('Company')

LEI: 549300PLYY6I10B6S323

Trading Update for the six months ended 30 June 2020

"The global engineering and consultancy market is facing unique and unparalleled challenges in 2020 from Covid-19 and volatility in oil prices. The safety of our people, clients and suppliers remains our top priority through this period. Despite the disruption, we are continuing to successfully win and execute work, supported by our strategy of broadening the business across the global energy market & the built environment. The relative strength we are seeing in chemicals & downstream, the built environment and renewables, where we will double our revenues in 2020, is helping to mitigate the impact of challenging conditions in upstream and midstream oil & gas. We have a proven track record of leveraging our flexible, asset light model at pace to protect margin and in Q2 completed the actions required to deliver overhead cost savings of over $200m in FY 2020" - Robin Watson, Chief Executive

Highlights

 
 --   Focus on safety and service delivery: 40,000 people successfully 
       working remotely and site- based employees enabled to work 
       safely 
 --   Commitment to reduce scope 1 and 2 greenhouse gas emissions 
       by 40% by 2030 
 --   Protecting margin: early actions taken to maintain utilisation 
       and align overheads with reduced activity levels. H1 margins 
       on a like for like basis down c70bps. Adjusted EBITDA margins 
       in ASEAAA maintained and improved in TCS. ASA margins impacted 
       by cost overruns on the legacy energy projects. Actions to 
       deliver >$200m overhead savings in FY 2020 already complete 
 --   Continuing to execute work: Like for like(2) H1 revenues 
       down c11% and adjusted EBITDA down c19%. Relatively robust 
       activity in chemicals & downstream and built environment 
       markets. Increased renewables activity 
 --   Continuing to win work: Secured $1.3bn of new orders in April 
       and May reflecting the breadth of our business. Evidenced 
       by EPC work for GSK, onshore wind and solar EPC awards in 
       the US, EPCm award to increase production of an oilfield 
       in Iraq, LNG renewal in Asia Pacific and a five year framework 
       agreement with the US Navy for engineering, design and maintenance 
       of fuel installations 
 --   Strategy to broaden business reflected in changing profile. 
       Renewables activity up 4% and upstream & midstream activity 
       down 5% 
 --   Strong balance sheet and liquidity. Expect net debt(3) at 
       30 June 2020 to reduce from $1.43bn at December 2019 following 
       Q1 disposals 
 --   FY2020 outlook: Remain focused on protecting our margin in 
       line with our strategic objectives whilst prepared for a 
       broad range of outcomes on activity 
 

Focus on safety and service delivery

The safety of our people, clients and suppliers is our top priority. Since the start of April, we have had over 40,000 people successfully working remotely. Their effectiveness in delivering for customers is supporting continued demand for our services and informs our cautious approach to plans for returning to the workplace. In addition, Wood employees continue to work safely at customer sites supporting vital services across the world.

Protecting margin: completed actions to deliver overhead reductions of >$200m in FY2020

We have a proven track record of protecting margin by leveraging our flexible asset light model in response to changing market conditions. In the second quarter we have taken swift action to make significant adjustments to the overhead cost base in anticipation of reduced activity levels, and have accelerated the strategic margin improvement initiatives committed to in our Capital Markets presentation in November 2019.

With a focus on pace of delivery, we have completed the actions required to deliver overhead costs saving of over $200m for FY 2020. These early and decisive actions have allowed us to mitigate the impact of reduced activity. The full benefit will be recognised in H2 leading to a stronger second half margin performance. The actions taken include:

 
 --   Voluntary Salary Reductions. The Board, executive directors, 
       senior leaders and others elected to take a temporary 10% 
       reduction in base salary effective from 1 April for 9 months. 
 --   Headcount reductions, temporary furloughing, reduced working 
       hours, unpaid leave and operational salary reductions. 
 --   Other overhead cost reductions including the stoppage of 
       discretionary spend, travel costs and increased utilisation 
       of shared service centres and high value engineering centres. 
 

Continuing to win and execute work: H1 2020 trading performance

In the first half we have seen the effect on our business of the unprecedented events of Covid-19, its impact on the global economy, and significant levels of oil price volatility. This has reinforced our view that our strategy to substantially broaden our consulting, projects and operations business across diverse energy and built environment markets has been the right one. Around 85% of our business is energy related, of which c35% is upstream and midstream oil & gas, c25% is chemicals & downstream and c25% is renewables and other energy. The built environment market accounts for around 15% of activity.

On a like for like basis(2) , adjusting for the disposals of the nuclear and industrial services businesses in Q12020, first half revenues will be down around 11% on H1 2019 demonstrating the resilience of demand for our services across a diverse market footprint. Reflecting the timing of macro challenges, the fall in H1 revenues was heavily weighted to the second quarter. Revenue in the second quarter is expected to be $2.0bn. First half revenue included increased renewables activity and relatively robust activity in chemicals & downstream and built environment markets. Adjusted EBITDA on a like for like basis will be down around 19% with margins down c70bps. This reflects the benefit of our actions to protect margins, together with the impact of cost overruns of on the legacy energy projects in ASA.

On a reported basis, revenue will be around $4.1bn, adjusted EBITDA will be around $295m to $305m and operating profit before exceptionals will be around $80m to $90m.

   Asset Solutions Americas ("ASA")   (c40% of H1 Revenue) 

Revenues have remained relatively robust in H1, down c8% on H1 2019. This reflects continued strength in capital projects activity in chemicals & downstream as projects, including the YCI methanol plant and the GCGV plastics facility, continue to progress well. We are also seeing higher activity in solar and wind work. Market conditions in upstream and midstream work are challenging. Adjusted EBITDA margins will be down on H1 2019. This reflects lower activity generally and cost overruns of c$30m on the legacy energy projects from 2019 which we are progressing to completion, partially offset by overhead cost reductions.

   Asset Solutions EAAA ("AS EAAA")   (c30% of H1 Revenue) 

Like for like revenue, adjusting for the disposal of the industrial services business, is down c11% on H1 2019. Robust activity levels on capital projects work in chemicals & downstream is being more than offset by lower levels of upstream oil & gas work. Adjusted EBITDA margins are in line with H1 2019 reflecting the benefits of swift action on utilisation and cost management in response to lower activity.

   Technical Consulting Solutions ("TCS")   (c30% of H1 Revenue) 

In Q4 2019, the formation of TCS brought together the capabilities of STS and E&IS into a combined, more efficient, global and industry leading consulting offering. Like for like revenue, adjusting for the disposal of the nuclear business is down c15% on H1 2019. The reduction in revenues reflects the decision not to pursue higher risk and lower margin construction contracts and the expected roll off of automation work on TCO. Activity in the built environment market, which accounted for around 45% of revenues in the first half, was relatively resilient. Adjusted EBITDA margins are up on H1 2019 benefitting from our strategic margin focus and the synergy delivery initiatives which started in Q4 2019.

Strong balance sheet & liquidity

Wood has considerable financial headroom. Our financing facilities of over $3bn include bilateral term loans of $300m, a revolving credit facility of $1.75bn and US private placement debt of c$880m. The bilateral and revolving credit facilities have a maturity date of May 2022. The US private placement debt has a variety of maturity dates between 2021 and 2031 with first maturity of $77m in late 2021 and the majority weighted to later dates. Covenants are set at 3.5x pre-IFRS 16 EBITDA.

At 31 December 2019 net debt was $1.42bn (2.0x pre-IFRS 16 EBITDA). In the first half of 2020:

 
 --   The disposals of our nuclear and industrial services businesses 
       generated proceeds of c$399m 
 --   The Board withdrew its recommendation to approve the final 
       dividend of c$160m 
 --   The current trading environment presents inherent challenges 
       to forecasting working capital movements and we are closely 
       monitoring customer payments. As we set out in our previous 
       guidance, we expect an unwind of advance payments and our 
       typical H1 movement will result in a working capital outflow 
 --   Capex reductions in relation to ERP and other discretionary 
       spend were implemented 
 --   Cash exceptional costs of c$55m were incurred relating 
       to the actions taken to deliver overhead cost savings in 
       response to market conditions, regulatory investigations 
       and prior year onerous leases 
 

Overall, we expect net debt(3) at 30 June 2020 to reduce from the December 2019 position of $1.42bn.

FY 2020 Outlook

We are focused on protecting our margin in line with our strategic objectives by managing operational utilisation and delivering >$200m of overhead cost reductions to deliver significantly stronger second half margin performance.

Order book at the end of May was $7.0bn, down c11% since December 2019, of which c$3.5bn is due to be delivered in 2020. During April and May, we booked new orders of $1.3bn including; engineering, procurement and construction work for GSK, onshore wind and solar EPC awards in the US, EPCm to increase production of an oilfield in Iraq, and an LNG renewal in Asia Pacific. We also secured a five year framework agreement with the US Navy for engineering, design and maintenance of fuel installations.

Typically, around 80% of our full year revenues are either delivered or secured at this point in the year. However, in 2020 the risk of further delays and postponements persists and we are prepared for a wider range of outcomes depending on activity across our broad end markets. Our completed actions to protect margin give us confidence in delivering significantly stronger margins in the second half.

Notes:

 
 1.   All figures in this trading update are unaudited. 
 2.   Adjusted EBITDA on a like for like basis is calculated 
       as adjusted EBITDA less the adjusted EBITDA from disposals 
       executed in the first half of 2020, and is presented as 
       a measure of underlying business performance excluding 
       businesses disposed. In the first quarter of 2020, executed 
       disposals consisted of our nuclear and industrial services 
       businesses. 2019 H1 revenue of $4,788m included $235m 
       relating to businesses disposed. 2019 H1 adjusted EBITDA 
       included $23m relating to businesses disposed. 
 3.   Net debt is stated excluding liabilities related to leases, 
       including those recognised under IFRS 16 . 
 

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 376 7922

International: +44 2071 928 000

Conference ID: 4389856

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

https://edge.media-server.com/mmc/p/nh7sf8xu

Notification authorised by:

Martin J McIntyre

Group General Counsel and Company Secretary

Note to Editors:

Wood is a global leader in consulting, projects and operations solutions in energy and the built environment . www.woodplc.com

 
 Wood 
 Andrew Rose - Group Head of Investor       01224 532 
  Relations                                  716 
 Ellie Dixon - Investor Relations Senior    01224 851 
  Manager                                    369 
 Citigate Dewe Rogerson 
                                            020 7638 
 Kevin Smith                                 9571 
 Chris Barrie 
 

Wood's financial advisers are not responsible to anyone other than the Company

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

TSTFLFFTRAITLII

(END) Dow Jones Newswires

June 19, 2020 02:00 ET (06:00 GMT)

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