Wood Group confident of improved second half

The FTSE 250 company said total EBITA for the six months ended 30 June was at the upper end of its $250m to $260m guidance range, which apparently reflected continued momentum in trading and the delivery of cost and revenue synergies.

Total EBITA was still down, however, falling 1.5% to $260m.

Its loss for the period was impacted by non-cash amortisation charges of $125m and exceptional costs of $101m, the board said, including anticipated costs to deliver synergies and a non cash impairment charge relating to EthosEnergy.

The loss stood at $52m, compared to profit of $6m for the first half of 2017, with basic losses per share of 7.9c, swinging from earnings of 1.1c 12 months ago.

Net debt stood at $1.6bn at period end, which reflected “strong” operational cash generation and working capital management, the directors said.

Cash conversion was 127%, compared to a negative 2% for the same period last year.

Wood Group said its deleveraging plan was underpinned by “strong” cash conversion, its growth outlook, synergies delivery and the planned disposal of non-core assets of at least $200m.

The board maintained their progressive dividend, with the interim dividend rising 2% to 11.3c.

On the integration programme, which Wood Group said was ahead of schedule, the board said “excellent progress” had been made on cost synergy delivery, with $20m delivered in the first half and expectation to deliver more than 50m for the full year.

It upgraded its three-year annualised costs synergy target from at least $170m to at least $210m, with no change to costs to realise synergies of around $200m.

The firm said it had secured revenue synergies worth more than $400m, which was up 30% since May, with a “strong” pipeline of opportunities.

Looking ahead, the Wood Group directors said they were “confident” of a stronger second half due to visibility on revenues, cost synergies and the phasing of projects and market recovery.

It reported a “strong” order book which currently stood at $10.6bn, comprising secured work and estimates of activity under long-term agreements.

Around 85% of 2018 full-year revenue had now been delivered or secured.

Wood Group said its full-year outlook remained unchanged, and it was on track to deliver growth in 2018 in line with previous guidance and market expectations.

“Performance in the first half is at the upper end of our guidance range, reflecting continued momentum in trading and delivery of cost and revenue synergies,” said chief executive Robin Watson.

“Integration is ahead of schedule and we are increasing our three year cost synergy target from at least $170m to at least $210m.

“Wood is delivering strong operational cash flows which underpin our deleveraging plan.”

Watson said the firm had “good” revenue visibility, with the board remaining confident of delivering a stronger second half.

“Our full year outlook is unchanged; we are seeing recovery in our core oil & gas market and good contract awards in broader industrial sectors.

“We remain on track to deliver growth in 2018 in line with previous guidance and market expectations.”