Wood Group lifts profit outlook on fresh contract wins

John Wood Group has upgraded its annual profit guidance following major contract wins and strong growth within its projects business.

The FTSE 250 engineering services company told investors on Tuesday its adjusted core earnings for this year are now forecast to be ‘ahead of our previous expectations’.

Wood Group has also raised its revenue outlook after turnover expanded by about a fifth at constant currency rates to $3billion (£2.4billion) for the six months ending June.

Sales in its projects division jumped by 29.6 per cent to $1.25billion, thanks to robust demand from the chemicals, and oil and gas sectors, which offset the run-down of lump sum turnkey activity.

Compared to the same period last year, the segment was the only one to see an uplift in its order book, after gaining a major engineering services contract with Euro Manganese and a life sciences engineering deal from GSK worth around $50million. 

But the group’s overall headline order book increased by 5 per cent from the end of December to about $6billion.

Other major contracts recently won by Wood Group have included an estimated $250million two-year extended deal to provide services to Brunei Shell Petroleum, Brunei’s largest energy producer.

Ken Gilmartin, chief executive of Wood Group, said: ‘As we look ahead, we are confident that our actions, the business model we have implemented and the market growth opportunities to which we have aligned, support the momentum we are building in our business. 

‘As such, we are increasing our full year guidance for the year for revenue and EBITDA.’

John Wood Group shares were 3.8 per cent, or 5.6p, higher at 153.7p on Tuesday morning, making them the second-best performer on the FTSE 250 Index.

Wood Group further announced on Tuesday that chief financial officer David Kemp would be standing down after a decade in his role. 

Kemp joined the firm in 2013 from Trapoil, later renamed Jersey Oil and Gas after being relaunched by entrepreneurs Andrew Benitz and Ronald Landsell.

During his tenure at Wood, the company acquired major rival Amec Foster Wheeler, but sold off numerous divisions, including its nuclear and consulting arms, partly to reduce its high debt pile.

The sale of the former business came just before the coronavirus pandemic started, when plunging oil prices slashed demand for the group’s services.

More recently, Wood was the subject of an unsuccessful takeover approach by private equity giant Apollo Global Management.

Wood’s board opened the firm’s books following a fifth bid worth £1.7billion, but Apollo walked away from the potential deal without explanation.   

Adam Vettese, an analyst at eToro, said: ‘The reasons that led Apollo to bid for the firm in the first place persist, which means another bidder could move in at some point with the share price depressed – or even Apollo again once its six-month cooling off period expires.