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RNS Number : 5328N
Wood Group (John) PLC
01 June 2022
Sale of Built Environment consulting business agreed
1 June 2022
This announcement contains inside information
John Wood Group PLC ('Wood' or 'the Group') announces it has
signed an agreement for the sale of its Built Environment
consulting business ('Built Environment Consulting') to WSP Global
Inc. ('WSP') for gross proceeds of approximately $1.9 billion.
Transaction highlights
-- Agreement to sell Built Environment Consulting to WSP for gross
proceeds of approximately $ 1.9 billion and a total enterprise
value of $1.81 billion
-- Consideration implies an EV/EBITDA multiple of 16x based on
FY21 pro forma pre-IFRS 16 adjusted EBITDA for Built Environment
Consulting including expected standalone costs (see note 1
on page 3)
-- Expected transaction costs of around $ 50 million and expected
cash tax costs of around $60 million
-- Net cash proceeds would result in a pro forma net cash position
at 31 December 2021, compared to net debt/EBITDA of 3.3x as
previously reported
-- Divestment provides enhanced financial flexibility which will
allow the Group to consider further options on the use of proceeds.
These include measures to improve the future sustainable cash
flow of the ongoing Group through the removal of certain liabilities,
investment to accelerate our strategy and shareholder returns,
for example through the restoration of an ordinary dividend
-- The transaction is subject to various conditions, including
Wood shareholder approval and certain regulatory approvals
-- Class 1 circular and notice of General Meeting to be published
in due course
-- Completion expected in the second half of 2022
-- Sale will significantly reduce the Group's leverage and help
us accelerate our strategy to be a leader across energy security
and sustainability
Robin Watson, Chief Executive, said:
"We are very pleased to have agreed this sale with WSP. This
transaction will deliver significant value for our shareholders and
marks a new chapter for Wood. It enables us to move onto our next
strategic phase with the financial flexibility to accelerate our
strategy to capture the growth opportunities ahead across both
energy security and sustainability.
"We are focused now on the steps to complete this deal and in
further developing our strategy, which we will outline in detail at
a capital markets day, when my successor as Chief Executive is in
place".
Alexandre L'Heureux, President and Chief Executive Officer of
WSP, said:
"The addition of the Built Environment Consulting business will
allow us to expand our Earth and Environment leadership across our
key markets and geographies. We share a common purpose of making
the world a better place and our united forces will only further
our expertise to create a more sustainable and resilient
world".
Use of proceeds
The primary and immediate use of the net cash proceeds from the
transaction will be a reduction in the Group's net debt to
strengthen our balance sheet and provide financial flexibility to
deliver our strategy.
At 31 December 2021, the Group's net debt (excluding leases) was
$1.4 billion and our net debt to adjusted EBITDA (excluding leases
and on a pre-IFRS 16 basis) ratio was 3.3 times. The pro forma
position at 31 December 2021 including the proceeds of this
disposal would have been a net cash position.
Capital allocation
From this stronger balance sheet position, we will consider
options for the best use of capital to maximise shareholder value,
including:
-- Ways of improving the future sustainable free cash flow of
the ongoing Group through early settlement of liabilities,
for example removing the Group's asbestos liability and accelerating
existing regulatory payments
-- Organic and inorganic investment to accelerate our strategy
-- Shareholder returns, for example through the restoration
of an ordinary dividend
The Group's target leverage is a ratio of net debt to adjusted
EBITDA of 0.5 to 1.5 times over time. We expect that the net cash
proceeds will reduce the Group's leverage on completion and that
our leverage will remain within the target range after some capital
is applied to the options above.
Lender consent and debt covenant amendment
As part of the sale process and Circular requirements, Wood has
agreed lender consent for the sale and a temporary amendment of the
net debt to EBITDA covenant for its revolving credit facility, UKEF
and USPP notes from 3.5x to 4.5x for both the June 2022 and
December 2022 measurement dates.
Outlook
The Group's outlook for this financial year remains unchanged
from that set out in our 2021 full year results announcement on 20
April 2022. Excluding the impact of this sale, we expect higher
revenue in 2022 across our business supported by the growth in our
order book.
Excluding the proceeds from the sale of our Built Environment
business, we expect no improvement in net debt in 2022 compared to
2021. The typical working capital outflow in our business in the
first half is expected to lead to net debt being higher at 30 June
2022 than at 31 December 2021.
The future of Wood: a leader across energy security and
sustainability
This transaction will provide the financial flexibility for us
to deliver on our strategy to be a leader across energy security
and sustainability through our exposure to five key growth
drivers:
-- Energy security
-- Carbon intensity reduction
-- Industrial decarbonisation
-- Resourcing the energy transition
-- Low carbon energy
These drivers provide significant growth opportunities for the
Group that, combined with our measured risk appetite, improved
operational delivery and strong balance sheet should help deliver
value for our shareholders over the medium term.
We will set out our strategy in more detail at a Capital Markets
Day at a later date, following the appointment of our new Chief
Executive.
Next events
The transaction constitutes a Class 1 transaction under the
Listing Rules and is therefore conditional upon, among other
things, the approval of shareholders. A Class 1 Circular will be
issued in due course, including a timetable for a General Meeting
at which shareholder approval will be sought.
Wood's Annual General Meeting (AGM) will be held on 22 June 2022
and the Group will publish a trading update for the half year
ending 30 June 2022 on 7 July 2022.
Conference call
A conference call for investors and analysts will be held at
8:00am (UK time) this morning. The call will be webcast live at
https://edge.media-server.com/mmc/p/t2b66rro and available as an
audio-only conference call (UK: 0800 279 6619; International: +44
(0)207 192 8338 ), conference passcode 3328705.
It will subsequently be made available to listen on demand at
www.woodplc.com/investors and a transcript will also be made
available on our website.
For further information:
Simon McGough, President, Investor
Relations +44 (0)7850 978 741
Kevin Smith, Citigate Dewe Rogerson +44 (0)7710 815 924
Holly Gillis, Citigate Dewe Rogerson +44 (0)7940 797 560
JP Morgan and Morgan Stanley acted as joint financial advisers
to Wood on this transaction.
JP Morgan
Richard Perelman, Alex Bruce +44 (0)20 7742 4000
Morgan Stanley
Tom Perry, Matthew Jarman +44 (0)207 425 8000
The person responsible for arranging the release of this
announcement on behalf of Wood is Martin McIntyre, Group General
Counsel and Company Secretary.
NOTES
Note 1: Based on an enterprise value of $ 1.81 billion and a
pre-IFRS 16 adjusted EBITDA of $111 million including expected
standalone costs for 2021. Excluding standalone costs, the pre-IFRS
16 adjusted EBITDA was $121 million, and post IFRS 16, the adjusted
EBITDA was $149 million.
All references to $ refers to US dollars.
FURTHER INFORMATION
Information on Built Environment Consulting
Built Environment Consulting is a leading environmental
consulting and engineering services business that provides critical
activities in a complex regulatory context, providing solutions for
environmental risks, increased climate resilience, helping to build
more sustainable infrastructure and improving mobility. It operates
across the government, industrial, infrastructure, power, water,
energy and mining markets, servicing clients along the whole asset
life cycle, and helping them realise opportunities to make their
assets safer and more productive. Built Environment Consulting has
a track record of attractive growth including resilient performance
through the Covid-19 pandemic.
Built Environment Consulting has over 100 offices predominantly
in North America, with locations in the UK and elsewhere in Europe.
The business faces end markets exposed to high growth trends,
including greater ESG focus, the drive for sustainability and
climate resilience, increasingly stringent regulatory standards and
growth in infrastructure expenditure.
The business employs around 5,500 consultants and technicians
and is led by a longstanding and experienced management team. Built
Environment Consulting enjoys strong relationships with its
customer base with around 80% of revenue from customers purchasing
multiple service lines and around 90% of revenue being repeat
business.
For the year ended 31 December 2021 Built Environment Consulting
had revenue of $1,236 million, operating profit of $120 million,
profit before tax of $112 million and adjusted EBITDA of $149
million, or $ 121 million pre-IFRS 16.
As at 31 December 2021, Built Environment Consulting's gross
assets were $ 1,072 million.
The following individuals are deemed by Wood to be to be key to
the operations of Built Environment Consulting:
-- Joe Sczurko, Chief Executive Officer
-- Grant Angus, Chief Financial Officer
-- Lytle Troutt, President Resilient Environments
Details of the transaction
On 1 June 2022, Wood and WSP entered a Share Purchase Agreement,
pursuant to which Wood agreed, on the terms and subject to the
conditions of the Share Purchase Agreement, to sell Built
Environment Consulting to WSP. The total enterprise value payable
by WSP for Built Environment Consulting is $1.81 billion. The gross
proceeds are subject to certain financial adjustments.
Prior to completion of the transaction, Wood will undertake a
group reorganisation to achieve the separation of Built Environment
Consulting from the remainder of the Wood Group by transferring
certain assets that are currently part of Built Environment
Consulting to the retained Wood Group, to be retained by Wood after
completion, and transferring certain other assets currently part of
the Wood to Built Environment Consulting.
The transaction is conditional upon various conditions,
including the satisfaction (or waiver, where applicable) of the
following:
-- Approval of a resolution approving the transaction by
shareholders at a general meeting of Wood
-- Completion of the reorganisation
-- Satisfaction of certain regulatory conditions
WSP has agreed to use its best endeavours to fulfil the
regulatory conditions as soon as practicable and, in any event, on
or before 1 March 2023.
The Board expects that, subject to the satisfaction and/or
waiver (where applicable) of the conditions precedent to the
transaction, completion will occur in the second half of 2022.
Important information regarding forward-looking statement
This announcement contains certain forward-looking statements
with respect to the financial condition, strategies, objectives,
results of operations and businesses of the Group and the
Continuing Group, and certain plans and objectives of Wood with
respect to the Continuing Group.
All statements other than statements of historical fact are, or
may be deemed to be, forward looking statements. Forward looking
statements are statements of future expectations that are based on
management's current expectations and assumptions and involve known
and unknown risks and uncertainties that could cause actual
results, performance or events to differ materially from those
expressed or implied in these statements. Forward looking
statements include, among other things, statements concerning the
potential exposure of the Group and the Continuing Group to market
risks, statements as to accretion and statements expressing
management's expectations, beliefs, estimates, forecasts,
projections and assumptions, including as to future potential cost
savings, synergies, earnings, return on average capital employed,
production and prospects. These forward-looking statements are
identified by their use of terms and phrases such as "anticipate",
"aims", "believe", "could", "estimate", "expect", "goals", "hopes",
"intend", "may", "objectives", "outlook", "plan", "probably",
"project", "risks", "seek", "should", "target", "will", "would" and
similar terms and phrases.
Forward looking statements are based on assumptions and
assessments made by Wood in light of their experience and their
perception of historical trends, current conditions, future
developments and other factors they believe appropriate. By their
nature, forward-looking statements involve risk and uncertainty,
because they relate to events and depend on circumstances that will
occur in the future and the factors described in the context of
such forward-looking statements in this Circular could cause actual
results and developments to differ materially from those expressed
in or implied by such forward-looking statements. Although it is
believed that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such
expectations will prove to have been correct and readers are
therefore cautioned not to place undue reliance on these
forward-looking statements.
For a discussion of important factors which could cause actual
results to differ from forward-looking statements in relation to
the Group, refer to the 2021 Annual Report and Accounts
All forward looking statements contained in this announcement
are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. Readers should
not place undue reliance on forward looking statements. Readers
should specifically consider the factors identified in this
announcement that could cause actual results to differ before
taking any action in respect of the Transaction. All of the
forward-looking statements made in this announcement are qualified
by these cautionary statements.
Each forward-looking statement speaks only as of the date it was
made. None of Wood or the Group undertakes any obligation to
publicly update or revise any forward looking statement as a result
of new information, future events or otherwise except to the extent
legally required, and, in particular, Wood will comply with its
obligation to publish further updated information as required by
law or by a regulatory authority and, in particular, its
obligations under the Prospectus Rules, the Listing Rules and the
Disclosure Guidance and Transparency Rules (as appropriate). In
light of these risks, results could differ materially from those
stated, implied or inferred from the forward-looking statements
contained in this announcement.
Non-IFRS measures
In the ordinary course of the Group's report, Wood's directors
and management use adjusted measures to evaluate performance,
including "Adjusted EBITDA", "Adjusted EBITDA (on a pre-IFRS 16
basis)" and "Net Debt (excluding leases).
Adjusted EBITDA is earnings before interest, taxes,
depreciation, and amortisation, including Wood's share of joint
venture profits and excluding exceptional items, which has been
calculated as set out above
Adjusted EBITDA (on a pre-IFRS 16 basis) is the Adjusted EBITDA
stated before the impact of IFRS 16.
Net Debt (excluding leases) is total group borrowings less cash
and cash equivalents.
Full details explaining how these measures have been calculated
and reconciled to the historical financial information prepared in
respect of Built Environment Consulting for the purpose of the
Transaction will be set out in the circular that Wood will issue in
due course.
No profit forecasts or estimates
No statement in this announcement is intended as a profit
forecast or estimate for any period.
No statement in this announcement should be interpreted to mean
that earnings, earnings per share or income, cash flow from
operations or free cash flow for the Group or the Continuing Group,
as appropriate, for the current or future financial years would
necessarily match or exceed the historical published earnings,
earnings per share or income, cash flow from operations or free
cash flow for Wood or the Continuing Group, as appropriate.
No offer or solicitation
This announcement does not constitute or form part of any offer
or invitation to purchase, otherwise acquire, subscribe for, sell,
otherwise dispose of or issue, or any solicitation of any offer to
sell, otherwise dispose of, issue, purchase, otherwise acquire or
subscribe for, any security.
Important information relating to financial advisers
J.P. Morgan Securities PLC, which conducts its UK investment
banking business as J.P. Morgan Cazenove, is authorised in the
United Kingdom by the Prudential Regulation Authority (the "PRA")
and regulated by the FCA and PRA. J.P. Morgan Cazenove is acting as
sponsor and financial adviser exclusively for Wood and no one else
in connection with the Transaction and the matters set out in this
announcement and will not regard any other person as its client in
relation to the Transaction and will not be responsible to anyone
other than Wood for providing the protections afforded to clients
of J.P. Morgan Cazenove or its affiliates, or for providing advice
in relation to the Transaction or any other matters referred to in
this announcement. Apart from the responsibilities and liabilities,
if any, which may be imposed on J.P. Morgan Cazenove by FSMA or the
regulatory regime established thereunder or under the regulatory
regime of any jurisdiction where the exclusion of liability under
the relevant regulatory regime would be illegal, void or
unenforceable, J.P. Morgan Cazenove and any person affiliated with
it assumes no responsibility whatsoever for and makes no
representation or warranty express or implied, in relation to the
contents of this announcement, including its accuracy, completeness
or verification or for any other statement made or purported to be
made by it, or on its behalf and nothing contained in this
announcement is, or shall be, relied upon as a promise or
representation in this respect whether as to the past, present or
future, in connection with Wood, or the Transaction. J.P. Morgan
Cazenove and its respective subsidiaries, branches and affiliates
accordingly disclaims to the fullest extent permitted by law all
and any duty, responsibility and liability whether arising in tort,
contract or otherwise (save as referred to above) which it might
otherwise be found to have in respect of this announcement or any
such statement or otherwise. Any reproduction or distribution of
this announcement, in whole or in part, and any disclosure of its
contents or use of any information contained in this announcement
for any purpose other than considering the terms of the Transaction
is prohibited.
Morgan Stanley & Co. International PLC ('Morgan Stanley'),
is authorised by the Prudential Regulation Authority, and regulated
by the Financial Conduct Authority and the Prudential Regulation
Authority in the United Kingdom. Morgan Stanley is acting as
sponsor and financial adviser exclusively for Wood and no one else
in connection with the Transaction and the matters set out in this
announcement and will not regard any other person as their client,
nor will be responsible to anyone other than Wood for providing the
protections afforded to clients of Morgan Stanley or its
affiliates, or for providing advice in relation to the Transaction
or any other matters referred to in this announcement. Apart from
the responsibilities and liabilities, if any, which may be imposed
on Morgan Stanley by FSMA or the regulatory regime established
thereunder or under the regulatory regime of any jurisdiction where
the exclusion of liability under the relevant regulatory regime
would be illegal, void or unenforceable, Morgan Stanley, its
affiliates and their respective directors, officers, employees and
agents, assume no responsibility whatsoever and makes no
representation or warranty express or implied, in relation to the
contents of this announcement, including its accuracy, completeness
or verification and nothing contained in this announcement is, or
shall be, relied upon as a promise or representation in this
respect whether as to the past, present or future, in connection
with Wood, or the Transaction. Morgan Stanley accordingly disclaims
to the fullest extent permitted by law all and any responsibility
and liability whether arising in tort, contract or otherwise (save
as referred to above) which it might otherwise be found to have in
respect of this announcement or any such statement. Any
reproduction or distribution of this announcement, in whole or in
part, and any disclosure of its contents or use of any information
contained in this announcement for any purpose other than
considering the terms of the Transaction is prohibited.
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