Wood has forecast a drop in earnings and revenues for its 2022 results after facing a “tough spell”.
In a trading update ahead of its full year results, the Aberdeen-headquartered firm said its finances have been affected by foreign exchange movements as well as decline in its global projects business following a change in the type of contracts it takes on.
It also comes after Wood completed the $1.9bn (£1.5bn) sale of its built environment segment last year, which accounted for 23% of the company’s overall revenues in 2021 and won’t be included in the 22 figures.
Profitability for the year was also impacted by dropping “high-margin” work in Russia following the country’s invasion of Ukraine, the firm said.
Wood said it has also been affected by “some cost pressures from staff retention and recruitment” in the year.
Full results will be published March 28.
Wood chief executive Ken Gilmartin said the firm, which employs over 1,000 in Aberdeen, was entering 2023 with “positive momentum”.
In the update he said: “We are focused on growth in energy and materials, both with structural growth drivers – energy security, energy transition, net zero and the circular economy – which create long term growth opportunities for Wood.
“Our leading positions in these markets, long-term client relationships and expertise in decarbonisation and digitalisation is enabling us to win additional market share.
“We have attractive growth prospects in our core markets, we are trusted by our clients, and we have the talent and solutions to enable a net-zero future.
“We’re focused on designing a strong future for Wood and enter this New Year with positive momentum.”
But Wood still has ‘some distance to go’
Stuart Lamont, investment manager at RBC Brewin Dolphin, said the company’s share price was still languishing but there was some reason for optimism, not least the sale the built environment business which reduced its debt pile.
In a note to investors, he wrote: “It has been a tough spell for Wood, with the share price now back at levels last seen in 2005. However, the company has been boosted by some recent analyst upgrades and today’s results highlight a few of the reasons why.
“Revenue continues to grow and debt, a perennial issue for the company in recent years, is to coming down, helped by the sale of the built environment operation last year.
“There are also positives to take from a relatively strong order book.
“Nevertheless, margins remain under pressure and, given the rising cost of debt, the market will want to see even more action to bring it down.
“Wood is beginning to turn a corner, but there is still some distance to go.”
Update
The trading update published Thursday projected adjusted EBITDA for 2022 of $375m – $385m (£308.3m – £316.5m) for the financial year, down at least 30% from $554m in 2021, and $630m in 2020.
Revenues, similarly, will be down to around $5.4bn, compared to $6.4bn and $7.5bn in 2020.
Wood said its revenues are adversely impacted by around $275m of foreign exchange rate movements, while its projects division saw revenues decline by around 7% over the year to around $2.2bn.
It added this section returned to growth in the second half of the year, after it moved away from “riskier” LSTK (lump sum turn key) contracts.
Looking at 2023, Wood said it expects “material improvement” in underlying operating cash flows in 2023 but this will be “outweighed in the short term” by payment of “legacy liabilities”.
The firm said it expects a return to “positive free cash flow in 2024”.
Wood shares close 3.32% up to 150.85p following the update.
