Berenberg downgrades Wood Group after outperformance

Berenberg downgraded Wood Group on Friday to ‘hold’ from ‘buy’ following recent outperformance, as it lifted its price target to 200p from 165p due to "the improved outlook", but said near-term risks are somewhat balanced.

The bank said Wood Group’s annual results earlier this week were broadly in line with January’s trading statement but with a significant operating loss driven by $542m of impairments.

Management reiterated the expectations presented at November’s capital markets day (CMD), targeting mid- to high single-digit EBITDA growth in 2023, with materially lower exceptional cash payments in 2024/25, it said.

"This outlook is supported by a backlog for delivery this year up by 10% yoy and headcount up by 8% yoy, which point to high single-digit revenue growth in 2023, ahead of current consensus," Berenberg said.

It noted the share price is up 33% since the approach from Apollo Global Management became public on 22 February, with further 15% upside from the latest offer from Apollo at 237p a share.

"If no deal is agreed, however, the shares may give up some of their gains, particularly given the recent sell-off in the broader oil-services sector," Berenberg said.