10 December 2015
Pre-close trading update for the year to 31 December 2015
John Wood Group PLC (“Wood Group” or “the Group”), issues the following pre-close trading update for the year to 31 December 2015. Full year results will be announced on 23 February 2016.
Our overall outlook for 2015 remains unchanged and we anticipate full year performance in line with previous guidance for EBITA of around $465m. In what is expected to be a prolonged period of challenging market conditions we are benefitting from our flexible business model and are focussed on managing utilisation, delivering overhead cost savings in excess of estimates at the half year and working with customers to develop efficient solutions. Our balance sheet and cashflow generation remain strong, supporting the delivery of strategic acquisitions and our previously stated intention to increase the dividend by a double digit percentage in 2015.
In Wood Group Engineering, we entered 2015 with reasonable backlog and performance also benefitted from the breadth and diversity of our business. In Upstream, work continues on key projects including Det Norske’s Ivar Aasen and Hess Stampede and these will both provide follow on work in 2016. Activity on the Saudi Aramco Offshore Maintain Potential contract is also progressing well. In our Subsea business, we are continuing work on larger projects including BP Shah Deniz and Gorgon. We also secured a number of FEED studies including two for Talisman in Vietnam in addition to work for Woodside on Browse. These smaller awards position us well for future detailed engineering scopes. Key customer relationships remain strong; in October we were awarded a five year contract to provide engineering services across BP’s existing subsea infrastructure in the Gulf of Mexico, UK, Norway and Azerbaijan. We have seen good activity in our downstream, process and industrial businesses where work on the Flint Hills refinery modification project is continuing. In September we also added to our UK automation capabilities with the strategic acquisition of Automated Technology Group. Looking ahead, current backlog is slightly below our typical range of 6 to 9 months visibility, and has been impacted in particular by the slow pace of significant new awards in the Upstream and Subsea markets.
Wood Group PSN Production Services performance largely reflects lower activity and pricing pressure in our US onshore business as well as reduced volumes in the North Sea. Following strong performance in the US onshore business in 2014, we have seen significant pressure on volumes and pricing in 2015. A significant decline in the US rig count has led to reduced demand for our capex related activity. Maintenance work on existing production has been less affected but has not been immune. Elsewhere in the US, we recently announced the acquisition of The Infinity Group, an industrial construction and maintenance provider to the petrochemical, refining and gas processing sectors, for an initial consideration of $150m. This will establish a strong brownfield service offering in the US downstream market, in the heart of the Gulf Coast, which we believe offers us attractive growth opportunities. In the North Sea, volumes under longer term contracts have been impacted by the continued reduction in project and non-essential maintenance work. More recently we have seen the impact of efficiency initiatives including changes in offshore work-shift rotation. These factors continue to contribute to headcount reductions. We remain focussed on cost leadership and customer alignment in this mature basin. Internationally, work has commenced on our Shell Gabon contract secured earlier in the year and on our four year Peregrino operations and maintenance contract for Statoil in Brazil secured in September. Working alongside WG Kenny in Australia, we have secured our first multi-year operations and maintenance and subsea contract with ConocoPhillips. A new $90m three year contract in Iraq with a major oil company secured in November will support growth in the Middle East.
In Turbine Activities, performance reflects the impact of continued maintenance deferrals with oil & gas customers and very disappointing performance in the second half in our power related business, EthosEnergy, despite ongoing efforts on capital efficiency and cost reduction. Expectations of near term performance are likely to lead to an exceptional non cash impairment of the carrying value of our investment in EthosEnergy at the year end.
Our strong balance sheet allows us to reinvest productively in the business, supporting our continued investment in acquisitions and organic growth. Cash flow generation remains strong, and we expect that net debt at the year end will be around 0.5 times EBITDA. Ongoing dividends, organic investment and M&A remain our preferred uses of cash. The recently announced acquisition of Infinity, which is expected to close by the end of December 2015, and the completion of the acquisitions of Automated Technology Group in September and Beta Machinery Analysis in June demonstrate the benefits of our strong focus on M&A.
A telephone conference call for analysts will be held at 9am today; participant dial-in details below:
UK: 01296 480 180
International: +44 1296 480 180
Passcode: 977 839#
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Notes to Editors:
Wood Group is an international energy services company with over $7bn sales. The Group is built on our Core Values and has two reporting segments – Wood Group Engineering and Wood Group PSN - providing a range of engineering, production support and turbine services to the oil & gas, and power sectors. www.woodgroup.com
Company compiled publicly available consensus 2015 EBITA on a proportionally consolidated basis is $448m and AEPS is 81.0c, last updated on 26th November 2015.
Laura McCracken +44 (0)1224 851 000
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Wood Group Press Office
Patrick Handley +44 (0)20 7404 5959