REG - Wood Group (John)PLC - Q1 trading update

John WoodAnnouncement

09/05/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240509:nRSI7015Na&default-theme=true

RNS Number : 7015N  Wood Group (John) PLC  09 May 2024

Q1 trading update

9 May 2024

 

Delivering improved profitability

 

John Wood Group PLC ('Wood' or 'the Group') announces a trading update for the
quarter ended

31 March 2024 ('Q1').

 

Ken Gilmartin, CEO, said:

"We are now in the second year of our growth strategy and are making good
progress, with EBITDA growth, margin expansion and an order book 9% higher
than a year ago. We continue to win exciting and complex work across energy
and materials, with sustainable solutions representing 40% of our pipeline.

 

"We are progressing with our Simplification programme and have made some
significant appointments this year including welcoming Arvind Balan as our new
CFO. I am proud of the strong leadership team we have in place and confident
that we will deliver on our significant potential. We are today reiterating
our EBITDA guidance for 2024 and our outlook for 2025".

 

Group performance

Q1 adjusted EBITDA was up 4% with margin expansion across all of our business
units offsetting lower revenue. This margin performance was helped by both
improved pricing and our strategic focus on building a higher quality
business, with our move away from EPC work.

 

Q1 revenue was $1,356 million, down 6%(1) compared to $1,463 million in Q1
2023, with growth in Operations offset by lower revenue in Projects, mainly
reflecting lower pass-through activity and lower EPC revenue in line with our
strategic shift.

 

Our order book at 31 March 2024 was $6.2 billion, up 9% compared to March
2023.

 

Consulting

Consulting saw a higher margin in the first quarter despite revenue 2%(2)
lower at $170 million, with strong growth in digital consulting offset by the
phasing of work in technical consulting and our energy asset development
business.

 

Consulting's order book saw double-digit growth compared to a year ago which
will support stronger revenue growth as the year progresses. Key wins in the
quarter include being selected by Woodside Partners as the consultant for the
Greater Sunrise development in Asia-Pacific, a blue-hydrogen ready unit in
Europe and several digital consultancy scopes for BP and National Gas.

 

Projects

Q1 revenue was down 15%(2) to $518 million, mainly reflecting lower
pass-through revenue and the roll-off of EPC work. Excluding these, revenue
was down 1.5% with good growth in oil and gas offset by weakness in the
minerals market. The margin was higher than last year, reflecting the revenue
mix.

 

Project's order book was lower than a year ago and is expected to recover in
the second half of the year, with a healthy pipeline of opportunities due for
award in the coming months. Key business wins in the period included a
detailed engineering design scope for Woodside's Trion project in the Gulf of
Mexico and an EPCm contract with Antofagasta for its Nueva Centinela copper
project in Chile.

 

Operations

Q1 revenue was up 5%(1) to $624 million, with higher activity levels across
Europe and the Middle East. The margin was also higher, with strong business
performance and our shift towards higher value services.

 

Operations' order book saw double-digit growth compared to a year ago, with
both strong demand for our services and significant renewals secured towards
the end of last year. Key business wins in the period included a
decarbonisation contract with TotalEnergies for flare gas recovery in the UK
North Sea and a contract to deliver maintenance and modifications for Equinor
in Brazil.

 

Investment Services

Q1 revenue was down 32%(2) to $44 million, mainly reflecting the expected
run-down of activity in our facilities business as we exit this business.

 

Simplification programme progressing well

In March 2024, we launched our Simplification programme to drive higher
margins over and above our pre-existing strategic plans. This programme
consists of:

·      Phase one: reducing central costs by putting greater ownership
and accountability for functional activities into the business units, and
reducing the number of central function roles

·      Phase two: reducing complexity in our processes and procedures,
and reducing external support costs

 

This programme is expected to generate total annualised savings of around $60
million from 2025, with around $10 million of savings in 2024. We have made
good progress so far this year and have completed phase one, with a reduction
in the number of central function roles. This phase will generate around

$25 million of annualised savings.

 

Full year outlook

We continue to expect 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.

 

Our operating cash flow performance is expected 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
flows will be in line with our previous guidance, and weighted to the first
half.

 

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.

 

2025 outlook

We continue to expect EBITDA growth in 2025 to exceed our medium-term target,
with the annualised benefits from our Simplification programme of around $60
million on top of growth consistent with our strategy. With this improving
profitability and continued improvements in cash conversion, we expect to
deliver significant free cash flow in 2025.

 

 

Conference call

A webcast and conference call will be held today at 8:00am (UK time) with Ken
Gilmartin (CEO) and Arvind Balan (CFO). The webcast will be live at
https://edge.media-server.com/mmc/p/k5tz49xm
(https://edge.media-server.com/mmc/p/k5tz49xm) .

 

To join the conference call, and ask any questions, please register via:

https://register.vevent.com/register/BI468ec546a3194b55b8e97a2a6cdf38cf
(https://register.vevent.com/register/BI468ec546a3194b55b8e97a2a6cdf38cf) .

 

The webcast and transcript will be available after the event at
www.woodplc.com/investors (http://www.woodplc.com/investors) .

 

 For further information:
 Simon McGough, President, Investor Relations        +44 (0)7850 978 741
 Vikas Gujadhur, Senior Manager, Investor Relations  +44 (0)7855 987 399
 Alex Le May / Ariadna Peretz, FTI Consulting        +44 (0)20 3727 1340

 

Notes

1.    Excluding the Gulf of Mexico labour operations sold in March 2023. It
contributed $21 million of revenue in Q1 2023.

2.    Like-for-like growth adjusted for businesses moved within business
units in the period: part of our Life Sciences business was transferred from
Consulting to Projects, and our Power business in the UK was transferred from
Projects to Investment Services.

 

 

 

Appendix

Profit Forecasts

 

1.   Wood Profit Forecasts

 

On 26 March 2024, in its full year results announcement for the year ended 31
December 2023, Wood provided the following guidance, which for the purposes of
the City Code on Takeovers and Mergers (the "Code") constitute a profit
forecast (the "Profit Forecasts"):

 

"Simplification programme to drive efficiency

 

·      Targeting annualised savings of around $60 million from 2025

·      Initial focus on central costs, with benefit within FY24 expected
to be around $10 million

·      Will improve both EBITDA and EBIT margins, and future cash
generation

·      Cash costs to complete of c. $70 million over next 12 months,
exceptional P&L charge in FY 24"

 

--

 

" Upgraded 2024 outlook - Adjusted EBITDA growth towards the top end of mid to
high single digit target (before disposals)

 

·      Margin expansion driven by topline growth, evolving business mix
and improved pricing, plus c. $10 million in-year benefits of our
simplification programme

·      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"

 

--

 

"Upgraded medium-term outlook

·      The simplification programme is expected to add to our growth
potential, leading to EBITDA growth in 2025 above our medium-term target

·      We will continue to expand our EBITDA margin and that benefit
will translate into our EBIT margins and support a significant increase in our
earnings per share over the medium term

 

Certain elements of the Profit Forecasts are referred to in this announcement.

 

2.   Basis of preparation

 

The Profit Forecasts are based on the current internal forecasts for the
remainder of the year ended 31 December 2024 and the period from and including
1 January 2024 to and including 31 December 2025 (as applicable) in respect of
John Wood Group PLC and its subsidiaries (the "Group").

 

The basis of accounting used for the Profit Forecasts is consistent with the
Group's existing accounting policies, which are in accordance with UK adopted
International Accounting Standards, International Financial Reporting
Standards ("IFRS") as adopted by the European Union and IFRS as issued by the
International Accounting Standards Board, the accounting policies which were
applied in the preparation of the Group's financial statements for the year
ended 31 December 2023 and the accounting policies which are expected to be
applied in the preparation of the Group's financial statements for the year
ending 31 December 2024.

 

The Profit Forecasts have been prepared on the basis referred to above and
subject to the principal assumptions set out below. The Profit Forecasts are
inherently uncertain and there can be no guarantee that any of the factors
referred to under paragraph 3 (Principal Assumptions) will not occur and/or,
if they do, their effect on the Group's results of operations, financial
condition or financial performance, may be material. The Profit Forecasts
should therefore be read in this context and construed accordingly.

 

3.   Principal assumptions

In confirming the Profit Forecasts remain valid, the directors of Wood (the
"Wood Directors") have made the following principal assumptions in respect of
the remainder of the year ended 31 December 2024 and the period from and
including 1 January 2024 to and including 31 December 2025:

 

Factors outside the influence or control of the Wood Directors:

 

§ no material change to the Group's assumptions in the forecast period for
growth of the Group's business;

§ no material change to the Group's assumptions in the forecast period in
relation to the Group's ability to access addressable markets through its
capabilities, business locations and relationships with its key customers;

§ no material change to the Group's assumptions in the forecast period in
relation to the Group's current cost savings plan related to the
Simplification programme;

§ achieving anticipated annualised savings of around $60 million from 2025,
with around a $10 million benefit in 2024;

§ no material change to the Group's historic levels of performance, business
improvement initiatives, and market positioning;

§ no material adverse events which would have a significant impact on the
operating results or financial position of the Group;

§ no material change in market conditions over the forecast period in
relation to the Group's customers or competitive environment;

§ no change to average time taken by customers to pay the Group;

§ no adverse change to current prevailing global macroeconomic and political
conditions (including geopolitical tension, further escalation of conflict or
war in or affecting areas where the Group operates or intends to operate (or
any sanctions imposed in response to any such events)) which is material in
the context of the Profit Forecasts;

§ no change in legislation, taxation or regulatory requirements relating to
the Group or the legislative or regulatory environment within which the Group
operates;

§ no change in general sentiment towards the Group and/or its operations
which has an impact on its ability to attract customers and to operate its
business;

§ no business disruption affecting the Group, its customers or other
stakeholders (including, but without limitation, any pandemic related
lockdowns and restrictions or similar, natural disasters, severe adverse
weather, acts of terrorism, cyberattacks, workforce shortage or labour
disputes);

§ no litigation or contractual disputes which are material in the context of
the Group, other than the ones already disclosed to the market and no material
adverse outcome from any ongoing or future disputes with any customer,
competitor, supplier, regulator or tax authority;

§ no material movements in inflation, interest rates, tax rates and foreign
exchange rates compared with the Group's estimates;

§ no change in the Group's existing debt arrangements, or its ability to
access external financing; and

§ no change in the accounting standards or policies which were used for the
Profit Forecasts.

Factors within the influence or control of the Wood Directors:

§ no material change to the strategy, budget or operation of the Group's
business;

§ no material change to the Group's current cost savings plan related to the
Simplification programme;

§ no material change in the Group's relationship with its key customers;

§ no material health and safety issues experienced by the Group;

§ no major regulatory investigation into the Group;

§ no material change in capital policies of the Group;

§ no unplanned capital expenditure or significant acquisitions, disposals,
developments, partnership or joint venture agreements being entered into by
the Group which would have an adverse impact on the Group's income,
expenditure or cashflow which is material in the context of the Profit
Forecasts;

§ no significant acquisition, disposals, developments, partnerships or joint
venture agreements will be entered into by the Group and no existing
partnerships or joint venture agreements will be terminated or amended, in
each case, which would have an adverse impact on the Group's income,
expenditure or cashflow which is material in the context of the Profit
Forecasts;

§ no material changes in key management of the Group; and

§ consistent application of the Group's accounting policies in the period to
31 December 2025.

 

4.   Directors' confirmation

The Wood Directors confirm that the Profit Forecasts remain valid and that
they have been properly compiled on the basis of the principal assumptions
stated above and that the basis of accounting used is consistent with Wood's
accounting policies set out above.

 

 

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 (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTZZGGKGRRGDZZ