28 June 2018
Pre-close trading update for the six months to 30 June 2018
“In the first half we have seen continued momentum in trading, cost and revenue synergy delivery. 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”
Robin Watson, Chief Executive
H1 trading performance and outlook
In the first half, continued trading momentum has resulted in higher activity delivering revenue growth across our business.
We anticipate delivering first half revenue of c$5.1bn - c$5.2bn and
EBITA in the range of c$250-c$260m.
Net debt at the end of June is anticipated to be approximately $1.7bn which reflects improved
operational cash generation.
We remain confident of delivering a stronger second half due to our typical second half bias and the phasing of cost
synergies, projects and market recovery. Our full year outlook is unchanged. We are confident of delivering FY 2018 EBITA in line
with guidance and market expectations1.
Asset Solutions Americas
- c35% of H1 Revenue
- Markets: c65% Oil & gas, c35% Industrial/other energy
Capital projects accounts for c85% of segment revenue. We have seen increased EPC activity on projects in power and in
downstream & chemicals, and these are the largest contributors to capital projects revenue. Improvement in US shale is
continuing, with activity focused on the Permian and Niobrara basins. In offshore upstream we remain active on a number of
greenfield projects.
Our operations services work accounts for c15% of segment revenue. Challenging conditions in the Gulf of Mexico and the completion of commissioning work in 2017 have resulted in weaker performance in H1
2018. In US shale, we are seeing an improvement in maintenance activity as expected. We have made good progress on revenue
synergies, securing the engineering, procurement & construction, commissioning and operations scope for upstream assets in
Trinidad.
Asset Solutions Europe, Africa, Asia and
Australia
- c35% of H1 Revenue
- Markets : c85% Oil & gas, c15% Other Industrial
Capital Projects accounts for c40% of segment revenue. Activity remains robust on projects including PMC work in Kuwait, our engineering and project management scope on the Marjan field for Saudi Aramco and our
rejuvenation project for Brunei Shell Petroleum. We are encouraged by recent wins including the Saudi Aramco/SABIC integrated
crude oils to chemicals complex and the engineering, procurement and construction management scope for the TEVA biotech
facility.
Operations services activity accounts for c45% of segment revenue. We are seeing the strongest growth in Asia Pacific, where the Exxon Mobil contract in Papua New Guinea continues
to perform well, and also in the Middle East where our work with Basra Gas Co is increasing.
North Sea activity is showing moderate growth on 2017 albeit from a low base and is expected to strengthen in the second
half.
Turbine joint ventures accounts for c15% of revenue. Relative strength in RWG is being offset by weaker performance in
EthosEnergy.
Specialist Technical Solutions
- c15% of H1 Revenue
- Markets : c40% Oil & Gas, c30% Minerals processing, c15% Nuclear, c15% Industrial/other energy
Increased activity in the first half has been led by minerals processing and automation & control. In minerals processing
we have good visibility on work in South America and in Australia including the Gruyere gold EPC project and are encouraged by recent wins including the Tasiast
gold mine expansion project in Mauritania. Volume in automation and control is up with the TCO project a significant
contributor. Activity in nuclear is improving and subsea remains robust.
Environment and Infrastructure Solutions
- c12% of H1 Revenue
- Markets: c95% Industrial/government, c5% Oil & Gas
E&IS is seeing good activity across environmental remediation consultancy and engineering & construction project
management services predominantly in North America. Full year performance will benefit from
increased activity as a result of US government and industrial spending and the cost overruns on projects experienced in 2017 not
repeating.
Synergies
Our integration programme remains ahead of schedule. We have delivered c$20m of cost synergies
in the first half against an expected total of >$50m for the full year. We anticipate an
exit run rate of >$80m by the end of the first year post completion, with the majority of cost
synergies being recognised in the Asset Solutions business units. In line with previous guidance, costs to deliver are expected
to be c$65m with c$40m recognised in exceptional costs and
c$25m in capital spend. Around half of the $65m will be recognised in
H1.
We remain confident of delivering annualised run rate cost synergies of at least $170m by the
end of the third year following completion.
We are making good progress on revenue synergies and have secured work on multi-year contracts worth >$300m. This includes our contract with Saudi Aramco/SABIC to support their integrated crude oils to chemicals
complex and an engineering, procurement & construction, commissioning and operations scope for upstream assets in
Trinidad. We are also seeing a number of awards that leverage involvement in earlier stages of
projects, strong in-country presence and enhanced capabilities including a maintenance scope with an IOC in Qatar
Deleveraging and cash flow
Net debt at the end of June is anticipated to be approximately $1.7bn which reflects improved
operational cash generation.
Despite our usual H1 working capital outflow, we anticipate strong operational cash generation. On a proforma basis, our
continued focus on working capital management has delivered a significantly improved working capital position than H1 2017. In
addition our recently established receivables facility provides working capital funding at a cost lower than our existing
facilities. The facility can be drawn for up to $200m and has accelerated cash of around
$50m as at 30 June.
The payment of the 2017 final dividend of $155m, capex, tax, interest costs and a number of
expected exceptional items offset the strong cash generation from operations. The expected exceptional costs include c$20m of costs to deliver synergies, c$20m in respect of onerous leases,
c$15m in respect of transaction related costs and c$10m in respect of
deferred consideration on acquisitions.
Deleveraging to within our preferred range of 0.5x to 1.5x within approximately 18 months post completion remains a key
priority. We currently anticipate that net debt and our net debt to EBITDA ratio will improve in the second half as we grow the
business and continue our focus on working capital management.
In addition, our focus on capital discipline will reduce capex and intangible spend to c$80m in
2018 which includes c$25m related to cost synergies delivery.
Our asset disposal programme is progressing well and we anticipate announcing disposals in the second half.
Conference call
A telephone conference call for analysts will be held at 8.30am today; participant dial-in
details below:
UK: 0800 389 7473
International: +44 1296 480 180
Passcode: 430602 #
- ends –
1 Company compiled consensus as at 19 June 2018. Comprises fourteen sell side analyst
estimates published since Wood’s Full year results announcement on 20 March 2018. Consensus 2018
EBITA on a proportionately consolidated basis is $633m and the range is $620m to $644m. Consensus AEPS is 60.1c and the range is 55.1c to 66.1c. Further
details are available here: ( www.woodplc.com/investors/analyst-consensus-and-coverage )
Notes to Editors
Wood is a global leader in the delivery of project, engineering and technical services to energy and industrial markets. We
operate in more than 60 countries, employing around 55,000 people, with revenues of around $10
billion. We provide performance-driven solutions throughout the asset life-cycle, from concept to decommissioning
across a broad range of industrial markets including the upstream, midstream and downstream oil & gas, power & process,
environment and infrastructure, clean energy, mining, nuclear and general industrial sectors. http://www.woodplc.com/
For further information contact:
Wood
Andrew Rose – Group Head of Investor Relations
01224 532 716
Ellie Dixon – Investor Relations Senior Manager
01224 851 369
Brunswick
Patrick
Handley
020 7404 5959
Charles Pemberton