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RNS Number : 8515H
Wood Group (John) PLC
29 November 2022
Capital markets day and trading update
29 November 2022
John Wood Group PLC ('Wood' or 'the Group') is today holding a
capital markets day to outline its refreshed strategy, including
new medium-term targets. A short trading update is also
provided.
Ken Gilmartin, CEO, said:
"Today is an important moment for Wood as we set out our
refreshed strategy. There is huge potential in Wood - we have over
35,000 highly skilled colleagues, long-term client relationships
and leading engineering and consulting capabilities. We are now
taking a more focused approach to growth, targeting specific
priority markets across energy and materials that best match our
competitive strengths. This tighter focus will help ensure we can
grow both profitably and sustainably.
"Our turnaround is progressing well, accelerated by the sale of
Built Environment Consulting and helped by the work done to focus
the Group on lower risk, reimbursable work. We have addressed
legacy issues and our strong balance sheet will allow us to deal
with the defined schedule of resulting cash outflows.
"Our strategy will deliver returns for our shareholders and
today we have set out new financial targets, including to grow
EBITDA by mid to high single digit CAGR over the medium term, with
momentum building over time as our strategy delivers. Most
importantly, based on the highly cash generative nature of our
underlying businesses, we expect positive free cash flow (after the
impact of legacy cash outflows) from 2024 onwards."
Trading update for the 2022 financial year
Trading in the first ten months of the year was in line with our
expectations and we confirm our full year guidance. We expect
revenue to be between $5.2 billion and $5.5 billion, and adjusted
EBITDA to be broadly around the middle of our guidance range of
$370 million and $400 million. This is after the negative impact
from recent exchange rate movements, which has had a c.$200 million
revenue and c.$10 million EBITDA impact.
Capital Markets Day
The Capital Markets Day will be held in London from 2:00pm (UK
time) today and will include presentations from the Wood CEO, CFO,
head of strategy and each of the divisional leaders. The event will
be available online at https://cmd.woodplc.com/ with a short
registration process required and will subsequently be made
available to watch on demand at www.woodplc.com/investors .
The key messages from the presentations are:
We have transformed the Group
-- The sale of Built Environment Consulting has restored
our financial strength.
-- This is a new Wood . A new leadership team has addressed
the reasons for historical underperformance, most notably
by improving project discipline and selectively focusing
on reimbursable and low-risk contract work. Our focused
growth strategy will target attractive opportunities
best matching Wood's competitive strengths.
-- We have addressed our legacy issues . Our strong balance
sheet will allow us to address a defined schedule of
cash outflows relating to legacy liabilities.
We are well-positioned for growth
-- Our markets provide attractive opportunities for growth
. The Energy and Materials markets offer significant
growth opportunities for Wood.
-- Wood is a global leader in its markets. We have outstanding
talent providing complex solutions in critical industries.
We have long term relationships with clients who value
us ahead of our peers.
-- Wood is an enabler of net zero . We provide solutions
across decarbonisation, energy transition, and materials
for a net zero world. Already, approximately 22% of
our revenue today is from these solutions(1) .
Medium term financial targets
We are focused on attractive end markets where we are
differentiated:
-- Large markets with solid growth - Oil & Gas and Chemicals
-- Small markets today with substantial growth potential
- Hydrogen and Carbon Capture
-- Large markets where we will significantly grow our share
- Minerals and Life Sciences
The combination of these should result in Wood's revenue
outperforming the combined market CAGR of around 5% over the medium
term(2) .
We expect adjusted EBITDA margins to be flat in the nearer term,
partly as we reinvest in the business to secure growth. In the
medium term, we see opportunity for some margin improvement.
We expect adjusted EBITDA to grow at mid to high single digit
CAGR over the medium term, with momentum building over time as our
strategy delivers.
Our businesses generate strong underlying cash flows and we
expect these to continue to grow over the medium term. This,
combined with the reducing legacy liabilities, will result in a
return to positive free cash flow from FY24 onwards.
Balance sheet
We have a strong balance sheet and will look to continue to
manage the leverage of the Group to retain material headroom to our
financial covenants to ensure suitable financial flexibility to
deliver our strategy, while managing our defined schedule of legacy
liability cash outflows.
We will look to manage our target leverage over the medium term
within a range of around 0.5 to 1.5 times net debt (excluding
leases) to EBITDA (pre-IFRS 16)(3) , with banking covenants set at
3.5x.
We expect net debt (excluding leases) to be around $350 million
to $400 million at 31 December 2022. This includes the recent
settlement of the Enterprise litigation case for $115 million and
the normalisation of our working capital.
For further information:
Simon McGough, President, Investor
Relations +44 (0)7850 978 741
Kevin Smith, Citigate Dewe Rogerson +44 (0)20 7638 9571
Notes
1. Estimated share of FY22 revenue related to sustainable
solutions, as defined by Wood. Sustainable solutions
consist of activities related to: renewable energy,
hydrogen, carbon capture & storage, electrification
and electricity transmission & distribution, LNG, waste
to energy, sustainable fuels & feedstocks and recycling,
processing of energy transition minerals, life sciences,
and decarbonisation in oil & gas, refining & chemicals,
minerals processing and other industrial processes.
In the case of mixed scopes including a decarbonisation
element, these are only included in decarbonisation
if 75% or more of the scope relates to that element,
in which case the total revenue is recorded in decarbonisation.
2. Estimated total growth rate across our addressable markets
in Energy and Materials from 2022 to 2025.
3. Net debt / EBITDA ratio calculated on the basis prior
to the adoption of IFRS 16, using net debt excluding
leases and EBITDA including IFRS 16 depreciation. This
measure is closely aligned to the measure used in our
debt covenants.
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END
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