10th Dec 2015 07:46
LONDON (Alliance News) - John Wood Group PLC Thursday reiterated its full-year earnings outlook for 2015 alongside its plan to increase its dividend by a "double digit percentage" despite increasingly tough market conditions.
Oil services companies have been hurt by the fall in oil prices since the middle of 2014, which has caused oil and gas companies to reduce activity and cut back on spending, with the slowdown trickling through to the oil services sector in which John Wood operates.
Despite the challenging backdrop, John Wood said it is on track to deliver earnings before interest, tax and amortisation of around USD465.0 million for the 2015 calendar year whilst also delivering dividend growth.
"In what is expected to be a prolonged period of challenging market conditions we are benefiting from our flexible business model and are focussed on managing utilisation, delivering overhead cost savings in excess of estimates at the half year and working with customers to develop efficient solutions," said the company.
"Our balance sheet and cashflow generation remain strong, supporting the delivery of strategic acquisitions and our previously stated intention to increase the dividend by a double digit percentage in 2015," John Wood added.
Wood Group Engineering entered 2015 with a reasonable backlog, providing a cushion as the slowdown began to creep through during the year, John Wood said, adding customer relationships with key clients remain strong. However, it said the division's current backlog is "slightly below" its typical range of six to nine months visibility.
Analysts have previously warned that the slowdown in the oil and gas sector will really only start to come through to the oil services sector in 2016 and 2017.
At Wood Group PSN, the division has been hit by lower levels of activity in the US and in the UK North Sea whilst maintenance services have been broadly unaffected but "not immune", John Wood said.
The company's Turbine business has also been hit by maintenance deferrals with oil and gas customers and reported a "very disappointing performance" for the second half of the year from the power-related business EthosEnergy, it said.
John Wood warned it was likely to book an exceptional non-cash impairment against EthosEnergy for the full year.
"Our strong balance sheet allows us to reinvest productively in the business, supporting our continued investment in acquisitions and organic growth. Cash flow generation remains strong, and we expect that net debt at the year end will be around 0.5 times Ebitda," said John Wood.
"Ongoing dividends, organic investment and mergers and acquisitions remain our preferred uses of cash," it added.
By Joshua Warner; [email protected]; @JoshAlliance
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