REG - Wood Group (John)PLC - Q3 trading update

John WoodAnnouncement

07/11/2024 07:00

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RNS Number : 2767L  Wood Group (John) PLC  07 November 2024

Q3 trading update

7 November
2024
This announcement contains inside information

 

Full year guidance confirmed

 

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

30 September 2024 ('Q3').

 

Ken Gilmartin, CEO, said:

"We continue to make progress on our turnaround, building a simpler, higher
quality Wood. Our Simplification programme is on-track to deliver annualised
savings of c.$60 million, and we completed the sale of CEC Controls and agreed
the sale of EthosEnergy in the period. The increasing quality of our business
is evidenced by higher pricing, expanded margins and a higher share of our
pipeline from sustainable solutions.

 

"It was, however, a mixed quarter for group performance. We saw strong
year-on-year growth in Operations and margin expansion in Consulting. Our
Projects business delivered a disappointing quarter, impacted by delayed
awards in our chemicals business and our continued weakness in minerals and
life sciences. As such, we continue to take actions to redress this
underperformance.

 

"We have reiterated our full year guidance of high single digit growth in
EBITDA and net debt to be broadly flat compared to last year, assuming the
sale of EthosEnergy completes by year end."

 

Group performance

Group Q3 revenue was $1,486 million, representing growth of 1% compared to
$1,477 million in Q3 2023, with strong growth in Operations offsetting lower
revenue in Consulting and Projects.

 

Group revenue for the first nine months of the year (YTD) was $4,330 million,
around 3% lower than the same period last year, mainly reflecting lower
revenue in our Projects business following our shift away from large-scale EPC
work and lower pass-through activity.

 

Group adjusted EBITDA for Q3 was lower than last year, with growth in
Consulting and Operations more than offset by a decline in our Projects
business.

 

Group adjusted EBITDA YTD was up 4% with very strong growth in Operations and
modest growth in Consulting partly offset by the weakness in Projects. The
group's adjusted EBITDA margin was up YTD, with higher margins across both
Consulting and Operations.

 

HY24 results and independent review

Following the exceptional contract write-offs relating to the exit from lump
sum turnkey and large-scale EPC reported at the half year 2024 results(1), and
in conjunction with the auditor's ongoing work, the Board, in response to
dialogue with its auditor, has agreed to commission an independent review to
be performed by Deloitte.

 

This review will focus on reported positions on contracts in Projects,
accounting, governance and controls, including whether any prior year
restatement may be required. An update will be provided as appropriate
following its conclusion.

 

The results presented in this trading update, and our full year outlook, are
before any potential impacts from the independent review.

 

Performance across businesses

Consulting continues to expand its margins. Q3 revenue was down 9%(2) to $163
million with YTD revenue down 3%(2) to $505 million, with lower activity
levels in our technical consultancy business partly due to client hesitancy
around political and regulatory outcomes.

 

Consulting YTD EBITDA was slightly higher than last year, with a higher margin
driven by enhanced business mix and improved pricing.

 

Projects performance was impacted by weaker end markets. Q3 revenue was down
2% to $584 million, with YTD revenue down 9% to $1,669 million, reflecting in
part the move away from large-scale EPC work and lower pass-through activity,
as well as ongoing weakness in our minerals, life sciences and chemicals
businesses.

 

Projects YTD EBITDA was lower than last year, following a significant
reduction in Q3. This reflects ongoing weakness across minerals and life
sciences, plus delays in awards across our chemicals business. This topline
weakness, combined with elevated overheads, was the main driver of the lower
adjusted EBITDA in the quarter. We continue to take actions to redress this
underperformance in Projects.

 

Operations continues to see strong momentum. Q3 revenue was up 9% to $652
million, with YTD revenue up 8% to $1,954 million. The revenue growth reflects
higher activity levels, particularly in Europe and the Middle East. We are
also seeing diversified market growth with the first major LNG win of scale
won by the Operations team in Australia.

 

Operations YTD EBITDA was higher than last year, helped by good operational
performance.

 

Investment Services Q3 revenue was down 12% to $86 million, with YTD revenue
down 31% to

$202 million. This mainly reflects the run-down of our facilities business as
planned.

 

Order book

Our order book at 30 September 2024 was around $5.4 billion, down 8%(2)
compared to September 2023 and lower than the $6.1 billion position at June
2024(3). This reflects the phasing of large awards in our Operations business
and ongoing weakness in Projects across minerals and life sciences, as well as
delays in awards across chemicals.

 

We expect the fourth quarter order book to reflect large work being awarded in
Operations and Projects.

 

Business wins in the period

We continue to develop our pipeline, particularly across sustainable solutions
which now represent 46% of our pipeline, up from 39% at the half year.

 

Significant contract wins in the period included:

·      Six-year contract with Shell for the world's largest floating
offshore LNG facility in Australia

·      Three-year contract to operate the Freepoint Eco-Systems advanced
recycling facility

·      $40 million engineering design for a sustainable packaging
production plant in Singapore

·      Seven-year master service agreement worth c.$200 million with BC
Hydro, a Canadian electric utility corporation, to modernise and expand the
electric grid in British Columbia

·      Appointed lead specialist consultant for the Greater Sunrise
Development

 

In October, we secured a significant engineering contract with Aramco to
provide a range of services including pre-FEED, FEED and EPC contracting
support for gas facilities in Saudi Arabia.

 

Disposals

In August 2024, we announced two disposals that together are expected to
generate net cash proceeds of around $125 million in 2024, plus loan notes due
to Wood of c.$40 million.

 

The sale of CEC Controls, an industrial and process control systems business,
completed in the quarter for net cash proceeds of $30 million.

 

The sale of EthosEnergy, a joint venture focused on rotating equipment, was
agreed in August 2024 and is expected to generate net cash proceeds of around
$95 million, plus loan notes of c.$40 million that mature in around five
years.

 

Regulatory approvals for the sale of EthosEnergy are ongoing. While we aim to
complete by the end of this calendar year, there is a potential for regulatory
delay and for the sale not to complete this financial year.

 

FY24 outlook confirmed

Our full year outlook remains unchanged:

·      High single digit growth in adjusted EBITDA, before the impact of
disposals, helped by an expected strong performance in the fourth quarter

·      Net debt (excluding leases) at 31 December 2024 expected to be at
a similar level to 31 December 2023 ($694 million) after disposal proceeds.
This is subject to the sale of EthosEnergy completing by the end of the year

 

FY25 free cash flow

While mindful of the weakness in our Projects business, we remain confident in
the continued improvement in the cash trajectory of the Group, with improving
operating cash flow and reducing exceptional drags. Our intention is to
provide free cash flow guidance for FY25 at our full year results.

 

Conference call

A 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/p6ob7524
(https://edge.media-server.com/mmc/p/p6ob7524) .

 

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

https://register.vevent.com/register/BIc6c584d6469f4ef880d8a3193f2599e4
(https://register.vevent.com/register/BIc6c584d6469f4ef880d8a3193f2599e4) .

 

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

 

The person responsible for arranging the release of this announcement on
behalf of Wood is Michael Rasmuson, Group General Counsel and Company
Secretary.

 

 

Notes

1.    The results for the six months to 30 June 2024 were unaudited and
have not been reviewed by auditors. The comparative results for the six months
to 30 June 2023 were unaudited and have been reviewed by auditors.

2.    Excluding CEC Controls, the sale of which completed on 30 August
2024. This business generated $9 million of revenue and $1 million of adjusted
EBITDA in Q3 2024 compared to $16 million of revenue and $2 million of
adjusted EBITDA in Q3 2023.

3.    The Group order book at 30 June 2024 was $6,112 million. This is
restated from the previously reported $6,209 million following a downward
revision in Projects of $97 million.

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