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RNS Number : 2802Y
Wood Group (John) PLC
13 January 2022
Full year trading update
13 January 2022 This announcement contains inside
information
John Wood Group PLC ('Wood' or 'the Group') announces a trading
update for the financial year ended 31 December 2021 ('FY21'),
including the headline unaudited financial results, alongside the
proposed sale of its Built Environment business.
Key points
-- FY21 results in line with our expectations for revenue and adjusted
EBITDA, as set out in our trading update on 12 November 2021,
and in line with consensus(1)
-- Stronger second half of trading saw improving momentum across
our businesses
-- Margin improvement of around 0.5 percentage points (at c.8.7%)
despite lower revenue, due to cost efficiencies, revenue mix
and improved execution
-- Order book at 31 December 2021 to be up significantly year-on-year,
supporting our expectations for increased activity in 2022
-- Net debt of c.$1.4 billion (30 June 2021: $1.3 billion), higher
than expected due to a larger working capital outflow from lower
collections, principally in our Projects business
-- Strategic review of Built Environment: Board has concluded that
a full sale process is the best option to deliver value for our
shareholders and this process is underway. A sales agreement
is expected to be announced in Q2
Robin Watson, Chief Executive, said:
"2021 saw improving momentum across our businesses, against a
backdrop of continued challenging market conditions. Together with
significant growth in our order book, this enables us to start 2022
confident that activity levels are improving. We also continued to
make good progress in de-risking the Group's project portfolio and
in driving margin improvement in 2021.
While our leverage is higher than we would like, we anticipate
that this will reduce significantly with proceeds from the proposed
sale of our Built Environment business and higher activity
levels.
The Board has concluded that a sale of our Built Environment
business is the best option to deliver value for our shareholders.
It will also strengthen the Group as we look to capitalise on the
significant opportunities ahead of us, including in energy
transition and industrial decarbonisation".
FY21 financial performance
Our headline unaudited full year results are:
-- Revenue of around $6.4 billion down 14% on a like-for-like basis(2)
, with growth in Consulting and Operations more than offset by
a significant decline in Projects
-- Adjusted EBITDA of around $550 million to $560 million down
9% on a like-for-like basis(2) , with improved EBITDA in Consulting
(higher revenue and margin) offset by lower EBITDA in Projects
(lower revenue and higher margin) and Operations (higher revenue
and lower margin)
-- Adjusted EBITDA margin of around 8.7% , compared to 8.2% last
year on a like-for-like basis(2) - improvement helped by cost
efficiencies, revenue mix and improved execution
-- Operating profit (before exceptionals) of around $195 million
to $205 million compared to
$214 million last year
-- Net debt (excluding leases) at 31 December 2021 of around $1.4
billion - an increase of around $400 million on last year (31
December 2020: $1,014m). This reflects a large working capital
outflow, including an unwind in working capital in our Projects
business due to lower EPC activity from market conditions and
contract portfolio de-risking, as well as expected exceptional
cash costs including around $70 million in regulatory payments
Balance sheet
Based on draft numbers, the ratio of net debt (excluding leases)
to adjusted EBITDA (pre-IFRS 16) was 3.2x at 31 December 2021 (31
December 2020: 2.1x). This is below our covenant level for the
Group's borrowings(3) , which are set at 3.5x (measured on a
similar basis) and are measured twice per year at period ends (30
June and 31 December).
This level of debt is significantly higher than our target
leverage. Increased activity levels in 2022, plus proceeds from the
proposed sale of our Built Environment business, are expected to
significantly strengthen the Group's balance sheet.
At 31 December 2021, based on draft numbers, the Group had
liquidity headroom of around $1.3 billion(4) .
Outlook for FY22
We expect activity levels to improve in 2022 across our
business. We have seen good momentum in order in-take in the fourth
quarter of 2021, including an improvement in Projects. We expect
our order book at 31 December 2021 to be significantly higher than
31 December 2020 with growth in all business units. Growth is most
notable across conventional energy and built environment.
Trading across businesses
Consulting saw revenue growth of around 2% on a like-for-like
basis(2) , with a strong second half of trading compared to both H1
2021 and H2 2020, helped by higher activity across built
environment and energy. Adjusted EBITDA was higher year-on-year
from both revenue growth and an expansion in margin, partly
reflecting efficiency improvements and increased utilisation in the
second half. The business unit's order book at 31 December 2021 is
significantly higher than last year, driven by energy and built
environment contract awards.
Projects saw a decline in revenue of around 35% over the year,
though H2 revenue was flat on H1. The decline in the year reflects
the completion of larger engineering, procurement and construction
(EPC) contracts, our focus on de-risking our contract portfolio by
moving away from large-scale fixed price work and new work being
limited to smaller scopes such as early-stage work. While we have
seen a stabilisation in market conditions during 2021, the scale of
recovery was below our original expectations due to the deferral of
activity and delays in new awards. Adjusted EBITDA was lower
year-on-year, reflecting the lower revenue, while the adjusted
EBITDA margin was over one percentage point higher supported by
improved project execution, cost efficiencies, higher utilisation
levels and a shift in mix to higher margin projects. While EBITDA
margin benefited from improved project execution overall, the range
of performance outcomes continued to be mixed, and going forward we
anticipate further benefits from our continued focus on improved
execution. The business unit's order book at 31 December 2021 is
expected to be slightly up on last year, having improved from Q1
throughout the year.
Operations saw revenue growth of around 3%, reflecting a
stronger second half compared to both H1 2021 and H2 2020 as market
conditions in conventional energy continued to improve. Adjusted
EBITDA was down year-on-year given a lower level of closing out
contract obligations in the year, which negatively impacted our
EBITDA margin. The disposal of our joint venture interest in
TransCanada Turbines (TCT) in Q4 2020 will also impact reported
EBITDA growth. The business unit's order book at 31 December 2021
is significantly higher than last year, driven by a recovery in
demand in conventional energy including a number of multi-year
contract renewals.
Operational highlights
We have made good progress in further positioning the Group for
a leading role in industrial decarbonisation and energy transition.
Strategically significant contract wins in H2 included:
-- Large EPC contract with Renewables Energy Group to expand renewable
diesel biorefinery in Louisiana, USA
-- Contract to be the integration project management contractor
for Humber Zero, one of the UK's leading industrial decarbonisation
projects
-- Permitting and FEED contracts for the UK's first hydrogen storage
and distribution pipeline infrastructure project, HyNet NorthWest
-- Framework agreement with Horisont Energi to provide specialist
engineering and management consultancy services across offshore
and onshore clean ammonia and hydrogen projects
-- EPC contract for a package of four solar projects to provide
renewable power for a customer's onshore oil and gas operations
in the USA
We continued to develop our presence in hydrogen. We became a
steering member of the Hydrogen Council in the UK and agreed a
Memorandum of Understanding with HYGEN Energy to accelerate the
production of green hydrogen for decarbonising transportation in
the UK.
We announced a technology partnership with Honeywell for
sustainable aviation fuel. The technologies, which are based on
Honeywell's UOP Ecofining process technology and Wood's hydrogen
plant technology, could reduce lifecycle greenhouse gas emissions
by 100% using certain feedstocks when compared to traditional
petroleum aviation fuel.
We also continue to win significant work in conventional energy,
increasingly helping our customers on their decarbonisation
journey. In the fourth quarter, we secured around $160 million of
contracts for oil and gas operations work in the UK's North Sea.
This work will include optimising operations, increasing production
efficiency and driving decarbonisation. We also won a large
two-year contract to deliver engineering and project management
services on the Safaniyah and Manifa fields for Aramco.
Update on Built Environment strategic review
As announced on 12 November 2021, the Group initiated a
strategic review of the part of our Consulting business facing the
built environment end market, which accounts for around 70% of
Consulting revenue. This Built Environment business generated
revenue of around $1.3 billion and adjusted EBITDA of around
$150 million in 2021.
The strategic review has considered a range of options to best
deliver value for our shareholders and to strengthen the Group. The
Board has concluded that a full sale process for the Built
Environment business is the best option and this process is
underway. A sales agreement is expected to be announced in Q2.
The strategic review is also assessing how we can best take
advantage of the positive trends and investment opportunities in
energy transition and industrial decarbonisation where we are
already a global leader. The remainder of our consulting business
covers a range of solutions centred on energy transition, such as
hydrogen, carbon capture technologies and digital integration
solutions.
Conference call
A conference call will be held today at 8:30am (UK time) with
David Kemp (CFO):
Number (UK): 0800 279 6619
Number (International): +44 2071 928 338
Conference ID: 7997469
This call will also be webcast live at
https://edge.media-server.com/mmc/p/jk77dgzh and will be available
on demand after the event on our website, www.woodplc.com/investors
.
Full year results publications
We will publish our full year results on 8 March 2022.
For further information:
Simon McGough, President, Investor
Relations +44 (0)7850 978 741
Ellie Dixon, Vice President, Investor
Relations +44 (0)1224 851 369
Kevin Smith / Chris Barrie, Citigate
Dewe Rogerson +44 (0)20 7638 9571
Notification authorised by Martin J McIntyre, Group General
Counsel and Company Secretary.
Notes
1. Company-compiled consensus for FY21 based on seven analysts who
published updated estimates following our trading update on 12
November 2021: revenue $6.4bn (range of $6.4bn to $6.4bn), adjusted
EBITDA $554m (range of $552m to $560m), operating profit (pre-exceptional
items) $200m (range of $173m to $214m), adjusted EPS 17.6c (range
of 12.6c to 22.4c) and net debt (excluding lease obligations)
$1,264m (range of $1,223m to $1,304m).
See www.woodplc.com/investors/analyst-consensus-and-coverage
2. Revenue on a like-for-like basis is calculated as revenue less
revenue from disposals executed in 2021 and adjusted EBITDA on
a like-for-like basis is calculated as adjusted EBITDA less the
adjusted EBITDA from those disposals. These amounts are presented
as a measure of underlying business performance excluding businesses
disposed. In FY21 executed disposals consisted of our joint venture
interest in Sulzer Wood. Comparative figures also exclude revenue
and adjusted EBITDA from the disposals of our nuclear and industrial
services businesses, YKK and our joint venture interest in TransCanada
Turbines (TCT) completed in 2020. These disposals accounted for
$nil revenue in FY21 (FY20: $77m) and adjusted EBITDA of $nil
in FY21 (FY20: $17m).
3. The majority of the Group's borrowings have financial covenants
(RCF, USPP, UKEF - see note below). The two covenant measures
are: (i) net debt to adjusted EBITDA not exceeding 3.5 times,
(ii) adjusted EBITA not less than 3.5 times interest. These covenants
are measured on 30 June and 31 December each year.
4. The Group's debt facilities are: revolving credit facility (RCF)
of $1.2 billion, USPP of $802 million, UKEF of $600 million and
various overdraft facilities.
5. The Group uses a receivables financing facility of $200 million.
The amount utilised at 31 December 2021 was $200 million (31
December 2020: $200 million). This facility is non-recourse to
the Group and, as such, is not included in our net debt.
Note to editors
Wood is a global leader in consulting and engineering across
energy and the built environment, helping to unlock solutions to
some of the world's most critical challenges. We provide
consulting, projects and operations solutions in more than 60
countries, employing around 40,000 people.
www.woodplc.com
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