23rd Aug 2022 08:36
(Alliance News) - John Wood Group PLC on Tuesday posted a widened interim pretax loss as it tackled rising costs caused by inflation and supply chain disruptions.
In the half-year that ended June 30, pretax loss widened to USD31.5 million from USD18.4 million a year ago. Finance expenses rose 19% to USD64.1 million from USD53.9 million.
John Wood shares were down 3.4% to 144.90 pence each in London on Tuesday morning, recovering somewhat after falling initially to a new 52-week low of 131.43p. The stock is down 38% over the past 12 months.
However, the Aberdeen-based engineering and consulting business swung to a post-tax profit of USD88.9 million from a loss of USD11.4 million.
An increase of profit from discontinued operations to USD88.4 million from USD30.8 million and a tax gain of USD32.0 million versus a tax loss of USD23.8 million made the post-tax profit possible.
In June, John Wood said it is selling its Built Environment Consulting business to Montreal-based consultancy firm WSP Global Inc for about USD1.9 billion gross. On Tuesday, John Wood said it expects net cash proceeds of around USD1.62 billion. It anticipates the sale to complete in the third quarter of 2022.
Revenue from continued operations stalled in the first half, being 0.4% lower at USD2.56 billion from USD2.57 billion a year before. Total revenue grew 0.2% to USD3.16 billion from USD3.15 billion. In July, John Wood had said it expected total revenue of around USD3.2 billion for the half year.
"Our first half of the year saw strong momentum in activity levels and order book growth but more to do on cash generation. It is encouraging to see the operational momentum in our business, especially the growth in our Projects and Consulting order book," John Wood said.
The order book stood at USD6.42 billion at the end of the half-year, up from USD6.13 billion a year prior.
"The strong order book gives me confidence for the future but there is a lot more to do on cash generation and this is our top priority," said Chief Executive Ken Gilmartin.
Gilmartin took up the role on July 1, after being appointed as chief operating officer in August of last year.
He added: "We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow...I look forward to sharing our plans at our capital markets day in November."
Given its "current elevated levels of debt", John Wood will not recommend any dividends in relation to 2022. The firm will reconsider this in 2023 as the sale of the Built Environment Consulting business promises to "transform" the balance sheet.
John Wood's last payout was in respect of the first half of 2019. A final dividend for that year was pulled due to the onset of the Covid-19 pandemic.
For the full year, John Wood expects revenue around USD5.2 billion to USD5.5 billion and adjusted earnings before interest, tax, depreciation and amortisation of around USD370 million to USD400 million.
Revenue in 2021 was USD6.40 billion, so the decline in 2022 would be at least 14%. Revenue had fallen by 15% in 2021 from USD7.56 billion in 2020.
Adjusted Ebitda in 2021 was USD553.9 million, so in 2022 would be at least 28% lower. Adjusted Ebitda fell by 12% in 2021 from USD630.4 million in 2020.
The company said it is aiming to de-risk from inflationary and supply chain pressures. "This focus on contract risk is particularly relevant with the inflationary and supply pressures seen across the world today. We limit our exposure to these risks through various contract terms, including inflation clauses and back-to-back contracts for raw materials supply," it explained.
By Tom Budszus; [email protected]
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