The new boss of Wood has revealed early impressions of the Aberdeen-headquartered multinational engineering and consulting business he has led since July.
“It is clear Wood has a strong platform to build on,” Ken Gilmartin told The Press and Journal.
Few of the company’s peers can match its ability to carry out “complex work” in critical industries on a global scale, he said, adding: “We are in the right markets for growth.”
Energy security and the race to net-zero are both high up the agenda in Wood’s core markets.
Well-placed for new opportunities
Mr Gilmartin said the company was well-placed to take advantage of emerging opportunities in these areas.
The firm – which employs about 40,000 people globally – has enough resources and expertise to help solve the global challenges of energy security, decarbonisation and energy transition, he added.
He was speaking after Wood unveiled its first set of results with him at the helm. He took over as chief executive earlier this summer, replacing Robin Watson in the role.
Wood posted pre-tax losses of £26.8 million for the first six months of 2022, compared with a trading shortfall of £15.6m a year earlier.
Revenue from continuing operations was flat at £2.16 billion, with growth in the group’s operations and consulting divisions – up 18% and 2% respectively – offset by an anticipated decline in the projects arm (-15%).
Wood, whose shares fell by about 2.4% to 146.35p, said its consulting business was helped by increased demand for energy solutions.
The strong growth in operations was supported by an improved market for oil and gas.
CEO’s transatlantic move
The company added: “As expected, revenue in projects was lower as we continue to see the impact from our move away from large-scale projects and as customer investment has yet to fully pick up.”
Bottom line figures were hit by an exceptional pre-interest and tax charge of £9.3m.
Mr Gilmartin, who has relocated from the US to Aberdeen, highlighted a strong forward order book.
As of June 30, the order book was worth £5.4bn – up by 5% year-on-year as Wood benefited from increased demand for its conventional and energy transition services.
The strong order book gives me confidence for the future. We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow.”
Ken Gilmartin, CEO Wood.
The jump in orders is fuelling expectations of strong revenue growth for the full year.
Current guidance is for revenue between £4.4bn and £4.6bn and adjusted earnings – before interest, taxes, depreciation and amortisation – between £312.6m and £338m.
Mr Gilmartin said: “We’ve had a solid first half, with good activity levels… and great client wins across the business.”
But the FTSE-listed company still has work to do on the cash generation front, he said.
Wood reported negative cash flow for the first half with outgoings exceeding income by £306.3m.
Wood has secured two new contracts from Enter Engineering, worth a combined $200m, to deliver major capital investment projects in Uzbekistan, marking a significant investment in the country’s economic diversification plan.https://t.co/qcwmqdL93c
— Wood (@Woodplc) August 17, 2022
Cash generation is now the “top priority” at the firm, Mr Gilmartin said, adding: While we have clear strengths and an exciting future ahead, there are some areas we need to improve upon and at pace.
“Over the last few years, we have not delivered value for our shareholders.
“The challenging market backdrop of lower customer investment and the Covid pandemic is part of the reason behind our performance, but this was exacerbated by company-specific issues.”
He said these included insufficient discipline in project selection, leading to inconsistent financial outcomes.
Progress was also hampered by high levels of restructuring and legacy issues, he added.
Wood has been awarded the 2022 Environmental Excellence Award by @WesternDredging. This recognizes the team supporting a @USNavy / @uscoastguard project using recycled materials to protect sensitive species in #SanDiego, while reducing shoreline erosion. https://t.co/dByTie0IKv pic.twitter.com/fPjugPyVMX
— Wood (@Woodplc) August 8, 2022
Mr Gilmartin continued: “These issues, combined with the market challenges, led to a lack of cash generation, a stretched balance sheet and a failure to meet financial expectations.”
Wood’s CEO said he was “really encouraged” to see improving operational momentum across the business in his first few months in the hotseat.
He added: “The strong order book gives me confidence for the future. We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow.
Global challenges
“We perform complex work in critical industries and our outstanding technical expertise and strong long-term client relationships position us well for growth across targeted markets.
“We have the consulting and engineering capabilities to help the world solve the global challenges of energy security, decarbonisation and energy transition.”
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