Energy engineering services business Wood Group (WG.) confirmed that it will report a huge fall in revenue and profits this year as it faces up to ‘unique and unparalleled challenges in 2020 from Covid-19 and volatility in oil prices.’
The share price lost a little more than 1% to 224.6p, valuing the FTSE 250 business at £1.54 billion.
FIRST HALF PROFITS SLUMP
In a mixed trading update the company said its adjusted earnings had slumped in the first six months of the year thanks to the Covid-19 crisis, and a resulting collapse in energy prices which hurt clients in the oil and gas sector.
Adjusted earnings before, interest, tax, depreciation and amortisation for the six months through June were seen falling 19%, with like-for-like revenue down around 11%.
Wood said relatively robust trading activity in the chemicals, oil refining and built environment sectors had helped buffer the blow from upstream oil and gas weakness.
But margins over the period had contracted by 70 basis points on a like-for-like basis.
Wood said it had, during the second quarter, completed actions to deliver overhead cost savings of over $200 million for the full year. The savings measures had come with exceptional costs of around $55 million.
NEW WINS BUT ORDERS FALL
The company's order book at the end of May was $7 billion, down about 11% since December 2019, of which about $3.5 billion was due to be delivered in 2020. During April and May, Wood booked new orders of $1.3bn.
Today’s news came hot on the heels of the award of two solar engineering, procurement and construction contracts worth over $200 million combined from an American power and energy company (16 June).
Berenberg analyst Henry Tarr said: ‘While this looks to be an in-line outlook, with questions remaining about activity levels for the second half, cash generation and exceptionals, we view this as a reassuring update relative to the stock’s performance year to date, which is down 43%.’