Wood Group needs strong second half to hit targets

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Sharecast News | 28 Jun, 2018

Oil and gas industry services provider Wood Group said it was confident of a pick-up in the second-half order to help it meet full year earnings targets, helped by later arrival of synergies from the acquisition of Amec Foster Wheeler.

For the six months to 30 June, the FTSE 250 group anticipates delivering first-half revenue of roughly $5.1-5.2bn and earnings before interest, tax and amortisation in the range of $250-260m.

The current consensus forecasts is for 2018 EBITA of $633m, with a range of $620-644m. Consensus adjusted earnings per share is 60.1 cents, from a range of 55.1-66.1 cents.

Conditions were said to be "challenging" in the Gulf of Mexico, contributing to a weaker performance for the Americas arm in the first half, while North Sea activity was showing "moderate growth" from a low base and is expected to strengthen in the second half.

Chief executive Robin Watson said the board was confident of delivering a stronger second half due to the company's typical second-half bias and the phasing of cost synergies, projects and market recovery.

“In the first half we have seen continued momentum in trading, cost and revenue synergy delivery," he said. "Our full year outlook is unchanged.

"We are continuing to see early signs of recovery in our core oil & gas market and good contract awards in broader industrial sectors. We remain on track to deliver growth in 2018”

Wood Group designs, constructs, repairs and operates industrial facilities mainly for the oil & gas sector, mainly the upstream production segment.

Generating around 35% of revenues, the Asset Solutions Americas arm, which generates most of its revenue from capital projects, reported increased activity in engineering, procurement and construction for projects in power and in downstream & chemicals, as well as improvement in US shale oil.

"Challenging conditions in the Gulf of Mexico and the completion of commissioning work in 2017 have resulted in weaker performance in the first half."

The Asset Solutions Europe, Africa, Asia and Australia reported "robust" activity on projects, encouraging recent wins including the Saudi Aramco/SABIC integrated crude oils to chemicals complex, plus strong operations services growth in Asia Pacific and the Middle East, but North Sea activity only "moderate".

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