Wood Group ‘comes out swinging’ with cost-cutting plan

webnexttech | Wood Group 'comes out swinging' with cost-cutting plan

“Although today’s results paint a mixed picture, Wood has come out fighting and there are some tentative reasons for optimism,” said Stuart Lamont, investment manager at RBC Brewin Dolphin. “Losses have narrowed and there is some good momentum behind earnings, with the company’s guidance upped for the year ahead.” READ MORE: Wood Group to offload Scottish-based Ethos Energy He added that divestments should help to simplify the business and free up capital for more profitable divisions: “Wood has been a company in transition for some time now – there is some good news today, but it will likely take much more of a catalyst to get the share price heading in a more positive direction.” Chief executive Ken Gilmartin was keen to play down any suggestion that the simplification programme equates to a downsizing of the company, which employs roughly 6,500 people in the UK and some 36,000 globally. It has been reported that the group is seeking to eliminate about 200 back office roles, but Mr Gilmartin said the picture is clouded because some will be redeployed to other parts of the business. “We are in the middle of the process, [so] it is way too early to be giving any numbers,” he said. “As a company we are still growing, and we are still recruiting,” Mr Gilmartin added. “We are currently recruiting more than 500 new roles in the UK, and 200 of those are in Aberdeen. “The reality for us is that our headcount is going up, so there is going to be a net increase in headcount. If our universities were producing more engineers we would take them in a heartbeat.” Ken Gilmartin (Image: Wood) Cost savings, higher margins and improved pricing means adjusted earnings growth will be at the “top end” of the mid-to-high single-digit target for 2024. Earnings growth in 2025 is also expected to be above the company’s medium-term target. However, the numbers for 2023 largely disappointed the market with revenues rising 7.9% to $5.9 billion, short of the $6bn guidance. The statutory net loss of $105m was an improvement on the previous year’s loss of $352m, but more than double the consensus estimate of $48m. Meanwhile net debt rose to $694m, up from $393m previously, due to free cash outflow and $64m paid in taxes on the 2022 sale of the group’s built environment consulting division. The company had guided to net debt of $680m. READ MORE: US giant pulls out of £1.7bn takeover of Aberdeen firm Nevertheless, Mr Gilmartin said the company has made considerable progress in the first 12 months of its three-year growth strategy, as reflected by an 8.8% improvement in 2023 earnings to $423m. Elsewhere, the sale of Ethos Energy that was first announced in January is underway with a further update expected later this year. “The one that we have given some guidance on and talked about before is Ethos, our joint venture with Siemens, that we are currently in a sales process on which is progressing well,” Mr Gilmartin said. “We also have other areas of the business that we are looking at, but they are all small and ones that are not of strategic importance to us.” Shares in Wood closed yesterday’s trading 10.3p lower at 137.9p, a decline of nearly 7%.

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