Wood Group hikes dividend 25% and says opex focus will deliver resilience

Oil and gas engineer John Wood Group grew sales and profits by double-digit rates last year and said its focus on operational expenditure should allow it to remain resilient and deliver growth despite the lower oil price environment.

Revenue from continuing operations spurted 14.3% to $6.57bn as strong growth in the PSN Production Services division more than offset the anticipated reduction in Wood Group Engineering and weaker performance from turbines, with profits from continuing operations before tax and exceptional items rising 10.9% at $414.5m.

The FTSE 250 company's adjusted diluted earnings per share (EPS) crawled 1% higher to 99.6 cents and directors delivered a final dividend of 18.6 cents per share for a total payout up 25% to 27.5 cents per share.

The board reiterated its intention to hike the dollar dividend by a double digit rate.

There was a greater volume of early-stage project work than in previous years, which management believes can significantly improve overall costs and was seen as an encouraging indicator of customers turning to engineering to improve capital efficiency.

"Our focus on production related activity significantly weighted towards customer opex will provide relative resilience in a more challenging market in 2015," said chairman Ian Marchant.

"We currently see opportunities for growth in a number of areas in 2015 including the Middle East, Africa and Australasia, and we will benefit from the recent Swaggart acquisition in the US where we see a good longer term market for our shale activities."

The Wood Group Engineering business saw earnings before interest, tax, depreciation and amortisation (EBITDA) fall 4.7% to £248.1m, much less than the 15% the board first warned about over a year ago, while production services in the PSN unit grew EBITDA 30.7% as PSN's smaller turbine activies segment saw EBITDA shrink 50.3%.

Management said it was taking "a number of actions" to cope with lower oil prices, including increasing its focus on business development to highlight to customers how to reduce cost and increase efficiency.

Plans are also being implemented to maintain and increase the company's own efficiency to cut or defer $30m of costs on last year.