John Wood Group Plc (LON:WG) has announced its half-year results for the six months ended 30 June 2024
Higher quality for your business and confirmation of your prospects
| HY24$m | HY23$m | Movement% | |
| Key findings | |||
| Order book1 | 6,209 | 5,991 | 3.6% |
| revenue | 2,844 | 2,986 | (4.8) % |
| Adjusted EBITDA2 | 219 | 202 | 8.5% |
| Adjusted EBITDA margin | 7.7% | 6.8% | 0.9 percentage points |
| Adjusted EBIT3 | 102 | 89 | 14.2% |
| Adjusted diluted EPS4 | 2.5c | 1.1c | 127.3% |
| Adjusted operating cash flow5 | 51 | 39 | 29.3% |
| Free cash flow6 | (168) | (219) | 23.4% |
| Net debt without leasing | 876 | 654 | 33.9% |
| LEGAL RESULTS | |||
| Operating (loss)/profit | (899) | 23 | m/m |
| Loss for the period | (983) | (27) | m/m |
| Basic loss per share | (142.9)c | (4.3)c | m/m |
| Cash flow from operating activities | 31 | (7) | m/m |
See notes on page 4. Full results can be found on pages 13, 14 and 20.
Ken Gilmartin, Wood Group CEO, said:
“These results show that we are making further progress in our turnaround. Our strategy continues to target higher EBITDA and a larger backlog, and we are improving the quality of our business through better pricing and higher margins. Our simplification program is progressing apace, and nearly half of the $60 million in annual savings starting next year are already secured. I am also pleased that we achieved all of this while recording our highest ever employee satisfaction, putting Wood in the top quartile of all our competitors and demonstrating that our team is focused and driven to reach Wood’s full potential.
“We have finalised our views on our exit from turnkey package projects and large-scale EPC projects and have reflected this in our results today, although crucially this has not changed our liquidity guidance. We have also recognised a non-cash goodwill impairment in our projects business relating to legacy acquisitions.
“Generating sustainable, strong free cash flow remains a key focus for executing our turnaround. Our adjusted operating cash flow has increased during this period and we continue to expect to reduce liquidity constraints going forward. We welcomed Arvind Balan as our new CFO in April and he has brought a renewed focus on liquidity across the company.
“Looking ahead, we remain confident that our strategy, actions and growth potential across all our markets will create significant value for our shareholders. We are pleased to confirm today our outlook for both 2024 and 2025, including the generation of significant free cash flow in 2025.”
We deliver a higher quality business
· Our growth strategy is bearing fruit
o Adjusted EBITDA increases by 8.5% to USD 219 million
o Order backlog increases by 3.6% to USD 6.2 billion
· We improve profitability
o Adjusted EBITDA margin increased to 7.7%
o Continued improved pricing in our pipeline and backlog
· Our simplification programme is progressing rapidly
o Already secured $25 million of the targeted $60 million in annual savings from 2025, with annual profits in 2024 at around $10 million
· Our views on the phase-out of LSTK and large-scale EPCs are complete
o Extraordinary expenses of $140 million, including $53 million write-off of accounts receivable, $61 million new provisions and $26 million final settlements (see pages 16-17)
o Expected cash impact spread over many years
o No change in our liquidity forecast
· We continue to win exciting and complex work
o 6-year contract with Shell for the world’s largest floating offshore LNG plant in Australia
o Completed FEED for the first phase of Aramco’s carbon capture project in Saudi Arabia
· Significant business with sustainable solutions7
o Sales from sustainable solutions amount to approximately USD 600 million and represent 21% of group sales.
o Around 40% of the factoring sales pipeline now consists of sustainable solutions
· We continue to develop our portfolio in line with our strategic priorities
o Sale of CEC Controls agreed, net proceeds of approximately USD 30 million expected in the second half of the year
o The divestment of the Ethos Energy joint venture is progressing well and is expected to be completed in the second half of the year.
We focus on cash delivery
· We have already made significant progress in reversing the trend
o EBITDA growth above target
o We have expanded our margins and will continue to do so
o Now a higher quality business, as there are no more flat-rate complete jobs left in our order book
· The next phase of our turnaround is the provision of cash
o Operating cash flow continues to improve
o Year-round focus on working capital with a clear plan to implement significant improvements
o Cash drags will be further reduced as already described
· We are approaching the turning point of our cash journey in 2025
o The underlying business is extremely solvent
o Path to significant free cash flow from 2025
Outlook for 2024 confirmed
· High single-digit growth in adjusted EBITDA, before taking into account the impact of divestments
· The performance is weighted to the second halfwhich reflects the typical seasonality of our business and the gradual introduction of the in-year benefits of the simplification program
· Operating cash flow will continue to improvepartly through improved cash management across our business, particularly given the Group’s weighted revenue profile in the second half of the year. Exceptional cash outflows will amount to approximately $125 million, of which approximately $50 million will be related to our simplification programme, which is expected to deliver approximately $60 million of savings from 2025. This now includes approximately $6 million of Sidara-related costs.
· Net debt is expected to be at a similar level as of December 31, 2024 as of December 31, 2023 after proceeds from planned disposals to be completed in the second half of this year
Outlook for 2025 confirmed
· Adjusted EBITDA growth in 2025 above our medium-term targetswith annual simplification benefits of approximately $60 million in addition to the originally targeted mid- to high-single-digit growth
· We expect significant free cash flow in 2025
Financial highlights of the first half of 2024
· Sales of $2.8 billion was down 5%, with growth in operations offset by lower revenues in the project business due to lower run-through activity, our strategic move away from the EPC business and weakness in our minerals business
· Pass-through revenue during the reporting period was $405 million compared to $506 million in the first half of 2023, with the entire decline in our project business. Excluding pass-through, Group revenue decreased by 2%.
· Adjusted EBITDA of $219 million increased by 8.5%, with margin improvement more than offsetting revenue growth and reflecting our shift to a higher quality business
· Adjusted EBITDA margin of 7.7% compared to 6.8% in the previous yearsupported by improved prices and lower EPC and throughput work in projects
· Adjusted EBIT Increase of 14.2% to USD 102 million
· Adjusted diluted EPS Increase of 127.3% to 2.5 cents, reflecting EBIT growth and a lower tax burden
· Free cash flow of (168) million US dollars includes the typical seasonality of our working capital profile and the expected staggering of exceptional cash flows (US$75 million in the first half of the year)
· As a result, Net debt (excluding leases) was $876 million as of 30 June 2024
Statutory results for the first half of 2024
· Operating loss of $899 million reflects the extraordinary items in the period
· Extraordinary items of USD 966 million (before taxes)
o Impairment of goodwill and intangible assets of USD 815 million (see page 17 for details)
o Losses of US$140 million related to our exit from LSTK and large-scale EPC work
o $12 million simplification costs
o Costs of USD 6 million related to Sidara’s takeover offers during the period
· Loss for the period of $983 million
· Basic loss per share of 142.9c
· Cash flow from operating activities of 31 million US dollars was significantly improved compared to the previous year
presentation
A presentation with Ken Gilmartin (CEO), Arvind Balan (CFO) and Jennifer Richmond (CSO) will be webcast today at 8:00am (UK time), followed by a question and answer session. The webcast is available at: https://edge.media-server.com/mmc/p/jjv68c9f.
The webcast and transcript will be available following the event at www.woodplc.com/investors.
