Wood Group expects 2016 earnings to fall by a fifth

John Wood Group said it expects full year earnings will fall around 20%, in line with current market expectations.

It calculated the consensus forecast for earnings before interest, tax and amortisation (EBITA) was $377m and adjusted diluted earnings per share (AEPS) is 66.4 cents.

The oil engineer said its end markets remained challenging, with clients putting further pressure on its margins due to their expectations of lower activity.

In a statement to be delivered at its annual shareholder meeting, the FTSE 250 group said: "Year to date financial performance, although down on 2015, continues to benefit from the breadth of our offering, our focus on management of utilisation in response to demand, and structural overhead cost savings."

Directors are confident the balance sheet strength, cashflow generation and longer term prospects support their intention to increase the dividend per share by a double digit percentage in 2016.

Ahead of a trading update for the first half of the year on 30 June, it was noted that in upstream engineering there had been no change in the slow pace of closing contracts for significant new detailed engineering projects.

The underlying downstream, process and industrial activities, including the refinery modification project for Flint Hills, are performing in line with the prior year.

PSN, the brownfield oil services arm, is expected to balance weakness in US shale with strength in South and Latin America, together with the contribution of the acquisitions of Kelchner and Infinity in the fourth quarter of 2015.

In US shale PSN has seen continued pressure on volumes and pricing, which are being countered with further cost cuts.