13 May 2015
Annual General Meeting Statement
John Wood Group PLC ("Wood Group" or "the Group"), issues the following Annual
General Meeting ("AGM") Statement.
Trading performance
Overall performance for the year to date, whilst down on 2014, reflects the
relative resilience of our business model. We are flexible and asset light,
with a range of predominantly reimbursable activities across customers' opex
and capex spending. We remain focused on SG&A cost reduction and utilisation,
and are helping customers to reduce their project costs, increase operating
efficiency and safely improve performance.
We now have improved visibility on customers' spending plans for the year,
although market conditions remain challenging. We are confident that we can
deliver SG&A cost reductions of over $30m in 2015 and anticipate that full
year EBITA will be broadly in line with analyst consensus.1 Looking further
ahead, we remain confident of delivering good growth as market conditions
improve.
Engineering
In Upstream, activity remains subdued, continuing the trend we initially
communicated in the second half of 2013. Although we still see a number of
projects being deferred we remain encouraged by the high volume of early stage
work as customers look to re-engineer projects with a view to improving
project economics. We remain active on a number of detailed engineering
projects,including Det Norske's Ivar Aasen in the Norwegian North Sea and Hess
Stampede in the Gulf of Mexico. In March we were awarded the FEED and procurement
scope for Statoil's Kollsnes gas plant in Norway leveraging our strength in
automation and control engineering and our 2014 Norwegian acquisition, Agility
Projects. Also in March, we were awarded an Offshore Maintain Potential
contract from Saudi Aramco for six years covering engineering, procurement and
construction management.
In Subsea and Pipelines, activity levels have reduced somewhat, with a smaller
number of large subsea capex projects coming to market and as a result we are
seeing an increase in the proportion of operations support activity in certain
areas. Our UK business is supporting activities in Africa, Middle East and the
Caspian, including activity with BP on Shah Deniz, with Zadco in Abu Dhabi and
with Tullow in Ghana. We have also recently secured a five year maintenance
contract for subsea well control spanning the UK, Singapore and Brazil as part
of a joint industry project. In Australia, we were awarded a FEED contract
with Woodside in February and we remain engaged on the Gorgon project,
expected to complete later in the year. Our onshore pipelines business is
benefitting from the impact of US customers seeking to improve transportation
to downstream facilities.
Our Downstream, process and industrial activities are performing well, in part
due to the impact of lower commodity prices. Following the successful
completion of early stage engineering on a refinery modification project for
Flint Hills Resources in the Eagle Ford region, we have recently been awarded
the detailed engineering, procurement and construction support scope.
PSN
In the Americas, the US onshore market has been impacted by the decline in the
rig count leading to reduced demand for our well-pad related activities
including fabrication and site preparation and, to a lesser extent, midstream
construction services. Our ongoing opex focused maintenance activity which
accounts for over half our onshore work has been less affected. In both
onshore and offshore, we are making good progress on cost reductions to help
reduce the impact of lower pricing and activity. In Trinidad our joint venture
was awarded a new five year, $250 million contract to provide engineering,
procurement and construction services to BP's offshore facilities.
In the North Sea, five year contract awards this year with Total and Enquest
covering engineering, construction, procurement, integrity and commissioning
help maintain our leading position and, together with ongoing long term
agreements, provide visibility on maintenance and brownfield engineering work.
Following our decision to reduce contractor rates in 2014, we have continued
to work alongside customers on efficiency improvement initiatives. We are
seeing the impact of reduced project work and in certain cases non-essential
maintenance work, but see longer term opportunities focused on improving
operating efficiency and late life asset management.
In our international business, longer term contracts secured in 2014 in
Australia and Asia Pacific are progressing and we see a number of near term
opportunities for growth in the Middle East, particularly in Iraq.
In Turbine JVs, the primary focus continues on actions to improve performance
in EthosEnergy where we have made some progress.
Cash flow and financing
We expect to deliver strong cash flow from operations in 2015, and, as
reported, we extended our $950m bilateral bank facilities until 2020. Our
strong balance sheet provides security and flexibility, and we remain at the
lower end of our preferred Net Debt: EBITDA range of 0.5 times to 1.5 times.
Our intention remains to increase the dividend per share by a double digit
percentage from 2015 onwards.
Board composition
As previously announced, Alan Semple will retire as CFO and from the Board at
the AGM and Michel Contie will also step down at that time. Following the AGM,
David Kemp will take over as CFO and join the Board as an executive director.
David was previously Wood Group PSN CFO and has been in the role of Deputy CFO
since January 1, 2015.
Outlook
We now have improved visibility on customers' spending plans for the year,
although market conditions remain challenging. We are confident that we can
deliver SG&A cost reductions of over $30m in 2015 and anticipate that full
year EBITA will be broadly in line with analyst consensus.1 Looking further
ahead, we remain confident of delivering good growth as market conditions
improve.
A trading update for the first half of the year will be provided on 25 June
2015.
- ends -
Notes to Editors:
Wood Group is an international energy services company with over $7bn sales.
The Group is built on our Core Values and has two reporting segments - Wood
Group Engineering and Wood Group PSN - providing a range of engineering,
production support and turbine services to the oil & gas, and power sectors.
www.woodgroup.com
Note 1 - Company compiled publicly available consensus EBITA on a
proportionally consolidated basis is $473m and AEPS is 86.4c, last updated on
1st May 2015.(http://www.woodgroup.com/investors/analyst-consensus/pages/default.aspx)
Enquiries:
Wood Group
Andrew Rose 01224 851 000
Laura McCracken
Carolyn Smith
Brunswick
Patrick Handley 020 7404 5959
Charles Pemberton