Final Results

6th Mar 2007 07:00

John Wood Group PLC

Final results for the year to 31 December 2006

Strong revenue and EBITA growth

John Wood Group PLC ("Wood Group", the "Group") is a market leader in engineering design, production support, well support and industrial gas turbine services for customers in the oil & gas and power generation industries around the world. Operating in 44 countries, Wood Group's businesses employ 20,000 people.

Financial Highlights

Revenues (i) of $3,468.8m (2005: $2,761.9m) up 26%

EBITA (ii) of $215.1m (2005: $149.1m) up 44%

Profit before tax of $183.6m (2005: $124.7m) up 47%

ROCE(iii) at 21.5% (2005: 16.6%)

Adjusted diluted earnings per ordinary share (iv) of 24.5 cents (2005: 16.6 cents) up 48%

Proposed full year dividend of 5.0 cents (2005: 4.0 cents) up 25% reflecting the group's confidence in continuing to deliver strong growth

Operating Highlights

Continued strengthening of market leading positions in strong oil & gas and improving power markets

Strong EBITA growth in all three divisions and ongoing investment across the businesses

Engineering & Production Facilities up 61%

Well Support up 26%

Gas Turbine Services up 16%

Significant focus on margin improvement - with EBITA margin(v) at 6.2% (2005: 5.4%)

Increase in headcount by 4,000 during the period

Engineering & Production Facilities - strong revenue and EBITA growth with strong performance from engineering services contributing to margin improvement

Engineering - strong demand across a range of clients and projects; active onprojects in upstream around the world; now a recognised world leader in subseaengineering; high demand for downstream services, in the US and Latin America

Production Facilities - market leading position in the North Sea, with high levels of activity from tiebacks, integrity enhancement and upgrade projects; growing international presence with activity in South America, Africa and Asia

Well Support - strong demand based on increased drilling activity and growing demand for artificial lift using electric submersible pumps. All three businesses performing well

Electric Submersible Pumps (ESP) - increasing international presence; growing activity in Russia and Chad and new facilities in Canada, Oman and Yemen

Pressure Control - important contract win with Saudi Aramco; further investment in manufacturing capabilities in Mexico and China

Logging Services - strong US activity; maintained leading position in Argentina

Gas Turbine Services - strong oil & gas market, and recovery in power market, leading to increasing demand for gas turbine maintenance.

Successfully growing business under long-term contracts

Increasing confidence in outlook

Sir Ian Wood, Chairman, Wood Group, said:

"We believe that the complex economic factors governing the supply and demandfor oil and gas will lead to sustained increases in exploration, developmentand production spending and this, together with our world leading marketpositions and differentiation, should enable us to continue our stronggrowth."ENQUIRIES:01224 851000Wood Group

Allister Langlands, Group Chief Executive

Alan Semple, Group Finance Director

Nick Gilman / Carolyn SmithBrunswick020 7404 5959Patrick Handley/ Nina CoadChairman's StatementIntroduction

In strong oil & gas and improving power markets, Wood Group has strengthened its market positions and delivered record results.

Revenues in 2006 grew 26% to $3,468.8m, EBITA grew 44% to $215.1m, andadjusted diluted EPS grew 48% to 24.5 cents. Given the strength of ourperformance, and confidence in our future prospects, we are proposing a finaldividend of 3.5 cents, taking the annual dividend to 5.0 cents, 25% up on lastyear.Markets

We anticipate continuing growth in demand for energy, driven by the growingglobal economies, particularly in the Asia Pacific region. Oil companies arefocused on reserve replacement from new discoveries and on maximising recoveryfrom existing fields. Gas demand continues to increase, driven by itsperception as the most environmentally friendly fossil fuel, by theincreasingly global gas market due to the growing significance of LNG, and bythe efficiency of gas turbine generation. Risks of imbalances in regional gasmarkets, such as the current concerns around gas storage in the US, maycontinue until a global gas market is more fully established.Our clients' investment decisions generally continue to be based on lower oil& gas prices and this would appear to confirm the potential long term natureof this oil & gas up cycle. We anticipate $50 - $60 oil as the likely scenariofor at least the next 3 or 4 years. This will lead to increasing explorationand production spend in most regions throughout the world and a strong demandfor oil & gas services, particularly those, like ours, that add value and canproduce cost-effective developments and enhanced production.On the power side, there is an increase in the demand for power in the NorthAmerican market and continuing growth in the installed base elsewhere in theworld, and we are seeing an increasing demand for our industrial gas turbineservices.On the downside, there continues to be significant geo-political uncertaintyin some of the key oil & gas provinces. However, these produce opportunitiesas well as threats, and tackling the range of challenges in some of thedifficult energy production areas round the world has become a core skill.That is not to say we will not have problems to overcome, but we have theability to carefully assess risk and reward and to build in a range ofmitigating factors to try and ensure we can service our customers in thesedifficult regions and at the same time achieve acceptable returns.

Strategy

Our strategy has four strands

to achieve a balance between field development and later cycle production support to achieve sustainable growth;

to develop world leading activities based on differentiated know-how and technology;

to achieve long term performance contracts in long term relationships which add value to our clients' business;

to extend our services and broaden our international reach in areas where we can successfully develop our market-leading positions.

We now have more than 20,000 people operating in 44 countries globally and during the year we have developed our activities in North and West Africa, the Middle East, the FSU and Asia Pacific.

People

I would like to express very grateful thanks on behalf of the Board to all ofour employees worldwide whose knowledge, skills, commitment and enthusiasmdrive our growth and success. Our intention is to be the employer of choice inall parts of our business and to attract and retain the best talent available.This will enable us to provide premier quality services to our customers andsuperior growth for our shareholders.

Board Changes

In 2006, Ewan Brown retired from the Board and was replaced by Ian Marchant.Ewan was a Director for 24 years during which time he provided exceptionalsupport to the Group and to me personally, and his unique style andcontribution are greatly missed. Ewan left with our very grateful thanks andbest wishes. Ian Marchant joins the Board with a broad business background andvaluable experience in the power sector through his role as Chief Executive ofScottish and Southern Energy PLC. Ian is already making a contribution to ourBoard discussions.The other significant change on the Board relates to my own position.Following 25 years as Chairman and Chief Executive, from 1st January 2007 I amfocussing on the Chairman's role, and Allister Langlands, who has served asDeputy Chief Executive for 7 years has taken over as Chief Executive. Allisterhas the ability, knowledge and experience to lead an excellent management teamto greater and better things. My role, as well as leading the Board, will beto provide the necessary encouragement and support, and work with mycolleagues in developing our market presence and trade relationships aroundthe world.

Looking ahead

I believe that the complex economic factors governing the supply and demand for oil and gas will lead to sustained increases in exploration, development and production spending and this, together with our world leading market positions and differentiation, should enable us to continue our strong growth.

Chief Executive's StatementIntroduction

I am delighted to be delivering my first Chief Executive's statement.

Key headline financials are: 2006 ($m) 2005 ($m) Change Revenues(i) 3,468.8 2,761.9 +26% EBITA(ii) 215.1 149.1 +44% EBITA margin(v) 6.2% 5.4% +15% Profit before tax 183.6 124.7 +47% ROCE(iii) 21.5% 16.6% +30% Adjusted diluted 24.5c 16.6c +48%EPS(iv)

Total dividend 5.0 cents per 4.0 cents per +25%

ordinary share ordinary share2006 was a year of strong growth across our three divisions. In Engineering &Production Facilities, we have increased our presence around the world andbroadened our range of projects and services. We acquired Somias in Algeriaand purchased the remaining equity in our engineering company in India. Wehave increased our capabilities in construction management and the processindustries, through the acquisition of Global Performance in South Carolina.Our operations providing commissioning and start up support are performingwell, particularly in Equatorial Guinea. In Well Support, we have extended ourbusiness in Chad and Russia and are increasing our manufacturing capabilitiesaround the world, including in China, Mexico and Saudi Arabia. In Gas TurbineServices we have increased our activity in markets anticipated to see thegreatest future growth in the demand for power, including the Middle East,South America and Asia Pacific. Additionally, our investment in extending ourrange of turbine parts and our addressable range of turbine types is adding toour increased confidence in the outlook.During the year our oil & gas clients faced supply chain constraints andsignificant cost inflation in certain areas. It is expected that thesepressures should ease over the next 2 - 3 years with significant industryinvestment in the key high inflation sectors such as drilling rigs and marinesupport vessels. To overcome resource constraints and reduce the inflationarypressures, we are significantly building up our global people presence andmanufacturing capacity. This, along with our focus on differentiated andhigher margin activities has contributed to an improvement in the Group EBITAmargin to 6.2% (2005: 5.4%).Divisional highlights

Engineering & Production Facilities

2006 ($m) 2005 ($m) Change Revenues 1,972.7 1,472.3 +34% EBITA 141.9 88.2 +61%

EBITA margin 7.2% 6.0% Significant expenditure in new offshore and onshore developments, and increasing expenditure on integrity and production enhancement of existing producing assets led to excellent revenue growth in the year. The stronger engineering performance contributed to the increased EBITA margin.

Engineering was engaged in supporting a broad spread of work across itsclients and activities. We have seen very strong demand for our services outof Houston, serving clients in both international markets and the Gulf ofMexico and have developed our engineering centres in London, Perth, Delhi,Aberdeen, Glasgow, Abu Dhabi, Kuala Lumpur, Bogota and Caracas. We are veryactive in upstream facilities, both offshore and onshore, and our globalpipeline and subsea engineering activities showed good growth. Downstream alsogrew strongly and was particularly active in upgrading projects for the US andLatin American refinery market. In midstream, our important LNG regasificationproject is progressing well.Production Facilities maintained its position as the North Sea market leaderin maintenance, modifications and operations support, supporting a wide rangeof clients, from the large international operators to smaller independents.International progress in the year was excellent, with good levels of activityin South America and Brunei, and significant progress in Trinidad, Algeria

andEquatorial Guinea.Well Support 2006 ($m) 2005 ($m) Change Revenues 739.1 645.7 +14% EBITA 73.6 58.5 +26% EBITA margin 10.0% 9.1%Increased drilling activity and growing demand for artificial lift usingelectric submersible pumps led to higher demand for our Well Support services.If we adjust for the disposal of Protech, our permanent downhole monitoringbusiness, in December 2005, Well Support delivered revenue and EBITA growth of22% and 38% respectively.In Electric Submersible Pumps (ESP) we increased our sales in internationalmarkets, and extended our geographic footprint with new repair shops in Oman,Yemen and Canada. In Pressure Control, we won an important contract with SaudiAramco that will lead to a new manufacturing facility in Saudi Arabia andsignificantly increased levels of activity. We are also making furtherinvestment in extending our manufacturing capabilities in the US, Mexico andChina. Logging Services delivered an excellent performance from the US andmaintained its market leading position in Argentina.Gas Turbine Services 2006 ($m) 2005 ($m) Change Revenues 713.7 607.8 +17% EBITA 38.0 32.7 +16% EBITA margin 5.3% 5.4%

The strong requirement for gas turbine maintenance, repair and overhaul in theoil and gas industry, combined with a recovery in the power market led to anincrease in revenue, with the start of some large Power Solutions contracts inthe final quarter having a significant impact. The strong margin in our oil &gas activities and recovery in our power aftermarket activities resulted in animproving underlying EBITA margin. However, the reported margin has been heldback by a lower EBITA margin from Power Solutions, reflecting, in part, lowermargins being recognised in the early stages of projects.Our Aero-Derivative activities delivered a strong financial performance, withhigher activity in our Pratt & Whitney joint venture. In Light IndustrialTurbines, we increased our overall market share and delivered an improvedperformance. We also invested in extending our range of turbine parts andbroadening our turbine range which should contribute to the growth in 2007 andbeyond. Our power activities in Heavy Industrial Turbines benefited from theimproving power market and our success in increasing the portion of businesson long term contracts. Our power station operations and maintenanceactivities made outstanding progress securing several new contracts in theyear and our Power Solutions business was awarded some large power stationcontracts in the fourth quarter.

Continuing Growth

Our focus on becoming the employer of choice, adding value to the efficiency,process and integrity of our customers' operations, and growing our marginswith higher added value services, have been key to our success in 2006. These,as well as the strong oil & gas and improving power market, will contribute

toour ongoing progress in 2007.Operating Review

Engineering & Production Facilities

Engineering & Production Facilities provides a broad range of services to oil& gas companies worldwide. Our services range from concept selection for newfacilities, through to their engineering design, project and constructionmanagement, and commissioning. We also provide facilities modifications, andoperations and maintenance support to existing facilities. 2006 ($m) 2005 ($m) Change Revenues 1,972.7 1,472.3 +34% EBITA 141.9 88.2 +61% EBITA Margin 7.2% 6.0%Significant expenditure in new offshore and onshore developments, andincreasing expenditure on integrity and production enhancement of existingproducing assets led to excellent revenue growth in the year. This wasstrongest in our engineering activities, with their share of division revenuesreturning to levels of around 40%. Production Facilities saw good growth frominternational activities and in the North Sea.The strong performance in our higher margin engineering activities contributedto the increase in our EBITA margin. In Engineering, we saw a more favourablepricing environment for our premium services and benefited from highutilisation. The success in certain of Production Facilities relatively highermargin international activities also favourably impacted its EBITA margin.We have successfully maintained our focus on being the employer of choicethrough training, career development and flexible hiring initiatives. We havemade further investments in satellite offices to support our main hubs whichprovides us access to additional skilled resources. This year we increased ourpresence in several locations, including Abu Dhabi, California, Delhi, Denver,Glasgow and London. Internationally we have been able to deploy ourexperienced international workforce on new market opportunities to meetgrowing client demand.

Engineering

We offer a broad range of engineering, project and construction management services in oil & gas production, transportation and processing facilities. We have market leading positions in:

Services Areas of Expertise Upstream Engineering, Deepwater and lightweight project topsides, onshore processing management, facilities and subsea construction engineering management Midstream Offshore and onshore pipelines engineering, compression and LNG regasification and associated technologies Downstream Clean fuel modifications, refinery upgrades Process & Chemical, and other process andIndustrial industrial plants Automation Automation services, including proprietary software

We have been working on a wide range of deepwater upstream projects in the Gulf of Mexico, including the BP Deepwater programme, Blind Faith, Independence Hub, Perdido, Shenzi and Tahiti. We have also been working on developments offshore Equatorial Guinea, Nigeria, Norway, UK and Venezuela; and onshore in India and the US.

We have significantly grown our business in subsea engineering developmentswith major projects offshore in Angola, offshore Australia; tiebacks in theGulf of Mexico; and a range of other projects around the world. JP Kenny, ourleading subsea engineering company, was awarded the Subsea Company of the yearaward by the industry body, Subsea UK. We have invested to increase ourgeographic footprint, in Abu Dhabi and Norway, as well as purchasing theremaining equity in our company in India.

In midstream engineering we are installing the first commercial scale application of our highly energy efficient patented regasification process, the LNG (Liquefied Natural Gas) Smart ‚® Air Vaporization Process, at Trunkline's LNG receiving terminal in Lake Charles, Louisiana. The terminal also includes a large Natural Gas Liquids (NGL) facility and is scheduled for completion in 2008.

We have seen high demand for our downstream engineering services and have beenactive on a wide range of refinery upgrade, de-bottlenecking and low sulphurdiesel modification projects. Our main focus is on the US and Latin Americanrefinery market, where we have recently entered into a long term contract toprovide downstream engineering support services to a major client's facilitiesacross the US. Our activities supporting the North American pipeline industrysaw increased revenues in the year, for a broad range of clients, and weexpect this sector to deliver strong growth over the next several years.We have strengthened our construction management and process capabilities withthe acquisition of Global Performance in Greenville, South Carolina. We havealso increased our engineering project & construction management (EPCM)activity, with contracts in the US and Norway, together with an EPCM contractfor automation services in Singapore.

Ionik, our specialist integrity and materials engineering consultancy, saw strong growth and is well positioned to expand its operations as our clients continue to focus on the integrity of their facilities.

Production Facilities

We offer a broad range of life of field production facilities support services to our clients around the world.

We are the largest maintenance, modifications and operations contractor in theNorth Sea, with a broad range of clients and are working on a number oftieback, integrity & process enhancement, upgrade and long term supportprojects. We are maintaining all our key contracts, with additions includingfurther work for Talisman and Hess. We have also extended our position as theleading onshore oil & gas terminal service contractor and now work on ninesites throughout the UK. We renewed our Shell Gas Plants contract and took onthe CATS (Central Area Transmission System) and Wytch Farm contracts for BP.We have continued to focus on extending our service offering and won our firstUK Duty Holder role for the Chestnut development. In addition, we have beensuccessful in winning further pre operations and start up support projects.In Colombia, Venezuela and Brazil, where we have been engaged in long-termsupport contracts for several years, we undertook some major shut downprojects. In Brunei, we extended the scope of our long term service contractand installed new facilities and subsea pipelines as part of a water injectionproject. We are also focused on extending our range of servicesinternationally and, in the Gulf of Mexico we carried out pre operations andstart up support operations on Atlantis, Thunder Horse and Shenzi. We are alsosupporting BP in the pre-operations phase of their LNG Project at Tangguh inIndonesia.The acquisition of Somias in Algeria, along with major contract wins on the InAmenas and In Salah fields, has established a strong presence in the country.In Trinidad, through a joint venture with local company Neal & Massy, we havebegun work on a five-year integrated maintenance contract. We have extendedour activities in Equatorial Guinea where we are now working for a number ofclients, including Amerada Hess, Exxon Mobil and Marathon. In Russia, we arecarrying out projects for TNK-BP and in Kazakhstan we are working on a supplychain management contract.Well Support

Well Support provides solutions, products and services to enhance production rates and efficiency from oil & gas reservoirs.

2006 ($m) 2005 ($m) Change Revenues 739.1 645.7 +14% EBITA 73.6 58.5 +26% EBITA margin 10.0% 9.1%Increased drilling activity and growing demand for artificial lift usingelectric submersible pumps led to higher demand for our Well Support services.If we adjust for the disposal of Protech, our permanent downhole monitoringbusiness, in December 2005, Well Support delivered revenue and EBITA growth of22% and 38% respectively.

We have successfully maintained our focus on training, career development and flexible hiring initiatives. Important initiatives include management development programmes, field engineer and service technician training, and HSE training.

Electric Submersible Pumps

We are a market leader in the sale, operation and service of electricsubmersible pumps (ESPs) used for production enhancement through artificiallift. The increasing long term demand for this service as oilfields mature andthe reliability and efficiency of ESP's improves is increasing the demand forour services and we are achieving good growth in both US domestic andinternational business.Our US operations performed well with sales in the South West and the MidContinent regions particularly strong. Our main manufacturing facility inOklahoma City is undergoing a major re-organisation to support the recent andanticipated growth in product demand. Additional investments were also made inenhancing our engineering research & development facilities to supportproprietary product developments aimed at heavy oil and extended run lifecapability. We also extended our operations in Canada and opened a new ESPservicing facility.Internationally, our business in Chad performed well and we are optimisticabout further growth. We increased our Russian operations to support ourgrowing sales, repair and service business. In the Middle East we areexpanding our operations in Oman, Yemen and Egypt, and have set up in Libya.In Latin America, we delivered good growth from Argentina, where the PanAmerican contract, announced at the end of last year, provided increasedactivity in the region. Our activity in Venezuela reduced somewhat but weexpanded our presence in other Latin American markets, especially Colombia,Ecuador and Brazil. In the Asia Pacific region, a substantial contract awardwas achieved for offshore ESP applications in the Bohai Bay.

Pressure Control

We are a market leader in the provision of surface wellheads and valves tocontrol reservoir pressure. In 2006, we delivered significant growth from bothour US and international business. We are seeing cost savings arising from ourimproved supply chain and are making further investments in 2007 in our lowercost manufacturing capacity.In the US, we have a broad based capability and infrastructure in conventionaland unconventional production and we are well represented in the very activeBarnett Shale area. In the Gulf Coast region, we are supporting drillingactivity and have been carrying out decommissioning work for a number ofcustomers whose equipment was damaged during the 2005 hurricanes. We alsoexpanded and added new facilities in the Rocky Mountain area to support anumber of new customers. In addition, our Canadian operations are showing goodgrowth.We opened a research & development and training facility in Houston which isbeing used to provide training to both customers and employees, as well asproviding additional resources to identify improvements on our productofferings. In Mexico, we have been increasing revenues over recent years, andare now setting up a new facility in Monterrey where we will carry outmanufacturing to support the local market as well as our other North Americanoperations.During the year, we won a significant, five year contract with Saudi Aramco,which will involve setting up a joint venture company in the Kingdom of SaudiArabia and establishing a local manufacturing facility. Elsewhere in theMiddle East, we won new contracts in Egypt, Qatar, Abu Dhabi, Oman, and Yemen.

In Australia, we extended our contract with Santos. In the UK, we had a number of successes in both product sales and field service operations.

Logging Services

We are a market leader in the provision of electric wireline and slickline mechanical services in the Gulf of Mexico and Argentina, and, in 2006, Logging Services performed well in these areas.

High commodity prices ensured strong activity in the US Gulf Coast region. Both the electric wireline and the slickline mechanical services had a good year and won a range of new contracts including several supporting deepwater fields. Our electric wireline pipe recovery operations completed one of the deepest stuck drill pipe recovery operations ever recorded in the Gulf of Mexico at 30,650 feet. We were also awarded work with Anadarko on several deepwater operations, with units now committed to ten drilling rigs.

Several locations were added to our US infrastructure including Alvarado in Texas, Oklahoma City, and Shreveport, Louisiana. We also invested in new equipment for our Production Testing business and now have a number of active bases operating in Texas.

We introduced high temperature production logging instruments and memory tubing/casing callipers. We also added a third deepwater 30/30 unit, which is capable of working at well depths below 30,000 feet and includes downhole tools that will operate at 30,000 psi bottom hole pressures.

We had a busy year in Venezuela, and were active on Lake Maracaibo, Anaco, Punta De Mata and San Tome. Our operations in Argentina continue to perform well and strengthen their position in the market.

Gas Turbine Services

Gas Turbine Services is the world-leading independent provider of integratedmaintenance solutions, and repair and overhaul services for industrial gasturbines and related accessories, used for power generation, compression andtransmission in the oil & gas and power generation industries. 2006 ($m) 2005 ($m) Change Revenues 713.7 607.8 +17% EBITA 38.0 32.7 +16% EBITA margin 5.3% 5.4%The strong requirement for gas turbine maintenance, repair and overhaul in theoil and gas industry, combined with a recovery in the power market, led to anincrease in revenue, with the start of some large Power Solutions contracts inthe final quarter having a significant impact. The strong margin in our oil &gas activities and recovery in our power aftermarket activities resulted in animproving underlying EBITA margin. However, the reported margin has been heldback by a lower EBITA margin from Power Solutions, reflecting, in part, lowermargins being recognised in the early stages of projects.

We expect to see further revenue growth in 2007, driven by the ongoing recovery in the power market feeding through to aftermarket providers, increased long-term contract activity, and the strong oil & gas market. The EBITA margin should increase with the improvement in performance in our power activities, including a growing contribution from our long-term maintenance and power solutions contracts.

Our headcount has increased by 10% to about 3,500 on the back of a significant increase in the scale of our power plant operations and maintenance business.

Our business is generally structured according to turbine type and size- withthe smaller turbines typically having a greater use in the oil & gas marketsand the larger turbines greater use in the power markets.

Light Industrial Turbines - generally less than 10 Mega Watts

Our LIT activities include the repair and overhaul of the Siemens and Solar light industrial turbines and related rotating equipment such as pumps and compressors, which are focused primarily on oil & gas applications. Our business in Aberdeen and Maracaibo addresses the global Siemens aftermarket and in the period strengthened its market position and profitability. Our operations in Houston and Dubai have a greater focus on Solar turbines and in the period we extended our range of turbine parts and our range of capabilities which should provide opportunities for growth in 2007 and beyond.

Aero-derivative - generally 10 to 50 Mega Watts

Our three aero-derivative gas turbine business, which comprises three joint ventures, delivered a strong financial performance.

Rolls Wood Group - our joint venture with Rolls-Royce, primarily serving customers in the oil & gas market.

Wood Group Pratt & Whitney - our joint venture with Pratt & Whitney, serving customers in the oil & gas and power markets.

TransCanada Turbines - our joint venture with TransCanada Pipelines, which is both GE LM and Rolls-Royce approved, serving customers in the oil & gas and power markets.

Rolls Wood Group benefited from the strong oil & gas market and will seefuture benefits from the increase in the installed base of units. Wood GroupPratt & Whitney, following its expansion of scope to include the provision ofturbine parts, and combined with the global improvements in the power market,had a particularly strong year, with contract wins in Libya, South Africa, andSouth America as well as the US market. TransCanada Turbines made goodprogress in the larger LM6000 turbines focused on the power market,particularly in the Middle East and the Americas.

Heavy Industrial Turbines (HIT) - generally more than 50 Mega Watts

The Group's HIT activities focus primarily on industrial gas turbines used inpower generation applications. Our HIT activities started to benefit from theimproving underlying power market, and were successful in increasing theportion of business under long term contract. Important contract wins includethe 16 year maintenance contract with Suez Energy International for themaintenance of 8 GE Frame 9E gas turbines, the major equipment at the 665MWplant located at the former Al Rusail Power Company in the Sultanate of Oman.

The continuing focus on securing long-term contracts and enhancing efficiency is expected to deliver further margin improvement going forward.

Support Services

Our broad range of ancillary services provide value-added solutions to our clients as well as supporting our Aero-derivative, LIT and HIT offerings, and enables us to provide an integrated service.

Our power plant operations & maintenance activities made excellent progress in2006 securing several new contracts in the year, including major long termcontracts with LS Power in the Western US and Mitsui in Ontario, Canadacovering advanced technology turbine equipment. This business has almosttrebled its facilities under contract in the last two years and currently hasmore than 20 long term contracts operating in excess of 8,000 MW of powergeneration.

Our Power Solutions business had lower activity in the first half of the year but entered into a number of contracts in the final quarter. These include three contracts with a combined value of approximately $195m for American Electric Power for peaking facilities providing 680MW of power.

Our accessories and components activities had a difficult year, with a lowercontribution from military customers somewhat offset by progress in oil & gasand power markets. Our turbine control systems business grew its market sharesignificantly in North America and is starting to expand internationally

Financial Review

Trading Performance

2006 ($m) 2005 ($m) Change Revenues 3,468.8 2,761.9 +26%EBITA 215.1 149.1 +44%EBITA margin 6.2% 5.4% +0.8 pointsAmortisation 7.6 4.8Operating profit 207.5 148.0 +40%Net finance costs 23.9 23.3Profit before tax 183.6 124.7 +47%Taxation 62.4 41.1Profit for the year 121.2 83.6 +45% Diluted EPS (cents) 23.4 16.4 +43%Adjusted diluted EPS 24.5 16.6 +48%(cents)Dividend per share 5.0 4.0 +25%(cents)

The financial results for 2006 were very strong, with good revenues, profitand margin improvement overall. Total revenue growth was 26%, with Engineering& Production Facilities up 34%, Well Support up 14%, and GTS up 17%. TotalEBITA growth was 44% overall, with Engineering & Production Facilities up 61%,Well Support up 26% and Gas Turbine Services up 16%. Excluding the impact ofthe Protech business sold in 2005, Group EBITA increased by 49% and WellSupport EBITA increased by 38%. A detailed review of the trading performance,including further analysis on revenues, EBITA, and EBITA margin movements iscontained within the Operating Review.Amortisation increased to $7.6m from $4.8m in 2005. Included within the 2006charge is the amortisation of software, development costs and licences alongwith amortisation of other intangible assets arising on acquisitions.

Net finance costs for the Group were $23.9m (2005: $23.3m). This represents interest cover(vi) of 9.0 times for 2006 compared to 6.4 times in 2005.

The tax charge for the year of $62.4m (2005: $41.1m) represents a tax rate of34.0% (2005: 34.0%) when measured against profit before tax, impairment andrestructuring charges and profit on disposal of subsidiaries. The underlyingtax rate in the period increased to 36.4% (2005: 34.2%), with the increaseincluding the impact of a greater proportion of the Group's profits beinggenerated in higher tax jurisdictions, such as the US. Offsetting thisincrease in the underlying tax rate are adjustments in respect of prior years,the impact of losses and other attributes, and a number of other permanentdifferences. Measured against profit before tax, the tax rate was 34.0% (2005:33.0%).Adjusted diluted earnings per ordinary share for the period increased by 48%to 24.5 cents (2005: 16.6 cents) and diluted earnings per ordinary shareincreased to 23.4 cents (2005: 16.4 cents). The final recommended dividend of3.5 cents (2005: 2.7 cents) represents an increase of 30%, and results in anincrease of 25% in the total dividend for the year of 5.0 cents (2005: 4.0cents). This increase reflects the Group's confidence in continuing strong

growth.Cash Flow 2006 ($m) 2005 ($m) Opening net debt (245.8) (354.3)EBITA 215.1 149.1Depreciation and other non-cash 63.6 45.9itemsCash generated from operations 278.7 195.0before working capital movementsWorking capital movements (53.6) (33.7)

Cash generated from operations 225.1 161.3 Acquisitions

(50.4) (33.4)

Capex and intangible assets (86.3) (65.6) Disposal of subsidiaries

7.3 22.8Issue/sale of shares 1.8 92.5

Interest, tax, dividends and other (109.6) (69.1) (Increase)/decrease in net debt (12.1) 108.5 Closing net debt

(257.9) (245.8)Cash flow generation has increased significantly over 2005, with cashgenerated from operations before working capital increasing $83.7m or 43%. Theworking capital outflows during the year reflect the strong sales growth inthe year and include an increase of $55.2m in inventories and an increase of$125.6m in receivables, partly offset by an increase of $127.2m in payables.Net working capital, the total of inventory, trade and other receivables, lesstrade and other payables, as a percentage of annual revenues fell from 16.2%in 2005 to 14.6% in 2006.The Group continued to invest in future growth with expenditure of $136.7m(2005: $99.0m) on acquisitions, capex and intangible assets. The investment inacquisitions, including minority interests and deferred considerationpayments, was $50.4m (2005: $33.4m) and included the acquisition of GlobalPerformance and Somias, details of which can be found in the Operating Review.These acquisitions contributed $59.2m to revenues and $3.9m to EBITA in 2006.Capex amounted to $76.5m (2005: $56.4m) and investment in intangible assetswas $9.8m (2005: $9.2m). Disposal of subsidiaries in 2006 represents the finalreceipt for the 2005 disposal of Protech.Net Debt 2006($m) 2005 ($m)Long term borrowings- Fixed Rate 203.9 180.0- Floating Rate 152.8 167.8Total long term borrowings 356.7 347.8Short term borrowings 41.5 47.9Total borrowings 398.2 395.7Cash 140.3 149.9Net Debt 257.9 245.8Total Borrowing Facilities 840.1 825.1

Net debt at 31 December 2006 was $257.9m, an increase of $12.1m during theyear (2005: $245.8m). Whilst largely US dollar denominated, the Group also hasother foreign currency borrowings which are mainly used to hedge the Group'snet investments in non-US dollar entities. Long-term borrowings amounted to$356.7m (2005: $347.8m) with interest payable at variable rates. Interest rateswaps have been entered into in respect of $203.9m (2005: $180.0m), or 57%(2005: 52%), of total long term borrowings and these have the effect ofconverting the borrowings to fixed rates of interest with maturities rangingfrom 2007 to 2012. The weighted average fixed rate of interest, includingmargin, is 5.0% (2005: 4.8%). At 31 December 2006, the Group had unutilisedborrowing facilities of $441.9m (2005: $429.4m) representing 53% (2005: 52%)of total borrowing facilities.

The Group's gearing ratio(vii) fell from 36% at December 2005 to 32% at December 2006.

The Group's Return on Capital Employed(iii), which is calculated as EBITA divided by average equity plus average net debt, increased from 16.6% in 2005 to 21.5% in 2006.

PensionsThe Group operates a number of defined contribution pension plans worldwideand one defined benefit pension scheme in the UK. The Group's defined benefitpension liability at December 2006 was $24.9m compared to $33.3m at December2005. This figure is stated before taking into account the related deferredtax asset of $7.5m (2005: $10.0m). The reduction in the liability, which issterling denominated, was due to an additional $3.7m (‚£2.0m) contribution madeby the Group in December 2006, a better than expected return on scheme assetsin the period, and an increase in bond yields which reduces the present valueof scheme liabilities.5 March 2006Notes

(i) Revenue in 2005 includes $37.5m in relation to the Protech business sold in December 2005.

(ii) EBITA represents operating profit of $207.5m (2005: $148.0m) for 2006including nil for businesses sold (2005: including $5.0m of EBITA in relationto the Protech business sold in December 2005), before adjusting forimpairment and restructuring charges of nil (2005: $6.0m), profit on disposalof subsidiaries of nil (2005: $9.7m) and amortisation of $7.6m (2005: $4.8m).This financial term is provided as it is a key unit of measurement used by theGroup in the management of its business.

(iii) ROCE is Return on Capital Employed and is calculated as Group EBITA, divided by average equity plus average net debt. ROCE excludes discontinuing activities.

(iv) Shares held by the Group's employee share ownership trusts are excludedfrom the number of shares in calculating earnings per ordinary share. Adjusteddiluted earnings per ordinary share is based on the diluted number of shares,taking account of share options where the effect of these is dilutive.Adjusted diluted earnings per ordinary share is calculated on earnings beforeamortisation, impairment and restructuring charges and profit on disposal ofsubsidiaries, net of tax.

(v) EBITA margin is EBITA divided by revenues

(vi)Interest cover is EBITA divided by net finance costs

(vii) Gearing is net debt divided by total shareholders' equity

JOHN WOOD GROUP PLC

GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2006

Company Registration Number 36219

Group income statement for the year to 31 December 2006

Note 2006 2005 US$m US$m Revenues 1 3,468.8 2,761.9Cost of sales (2,768.0) (2,209.7) Gross profit 700.8 552.2 Administrative expenses:

Profit on disposal of subsidiaries 4 - 9.7Impairment and restructuring charges 5 - (6.0)Other administrative expenses

(493.3) (407.9) Administrative expenses (493.3) (404.2) Operating profit 1 207.5 148.0 Finance income 2 5.3 2.5Finance expense 2 (29.2) (25.8) Profit before taxation 3 183.6 124.7 Taxation 6 (62.4) (41.1) Profit for the year 121.2 83.6 Attributable to:Equity shareholders 120.5 80.5Minority interest 26 0.7 3.1 121.2 83.6 Earnings per share (expressed in cents per share)Basic 8 24.4 17.0Diluted

8 23.4 16.4 All items dealt with in arriving at the profits stated above relate to continuing operations.

Group statement of recognised income and expense for the year to 31 December2006 Note 2006 2005 US$m US$m Profit for the year 121.2 83.6

Actuarial gains/(losses) on retirement benefit liabilities 30 8.5 (2.5)Movement in deferred tax relating to retirement benefit liabilities (2.6) 0.7Cash flow hedges - fair value gains 1.8 2.4- reported in income statement for the year (1.0) 1.4Tax on foreign exchange losses offset in reserves 3.2 -Exchange differences on retranslation of foreign currency net assets 5.6 (15.5) Total recognised income for the year 136.7 70.1 Adoption of IAS 32 and IAS 39- Retained earnings - (0.9)- Hedging reserve - (2.4)

Total recognised income since last annual report 136.7 66.8 Total recognised income for the year is attributable to:Equity shareholders 136.0 67.0Minority interest 0.7 3.1 136.7 70.1

Group balance sheetas at 31 December 2006

Note 2006 2005 US$m US$mAssetsNon-current assetsGoodwill and other intangible assets 9 385.5 328.6Property plant and equipment 10 247.9 219.5Long term receivables 5.2 13.5Financial assets - derivative financial instruments 18 2.6 1.3Deferred tax assets 20 36.6 19.3 677.8 582.2 Current assetsInventories 12 424.1 362.9Trade and other receivables 13 792.5 610.7Income tax receivable 8.7 5.4Financial assets - derivative financial instruments 18 1.3 1.7Cash and cash equivalents 14 140.3 149.9 1,366.9 1,130.6LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings 16 41.5 47.9- Derivative financial instruments 18 0.9 0.6Trade and other payables 15 710.8 526.7Income tax liabilities 37.7 14.8 790.9 590.0Net current assets 576.0 540.6 Non-current liabilitiesFinancial liabilities- Borrowings 16 356.7 347.8- Derivative financial instruments 18 0.1 -Deferred tax liabilities 20 7.3 7.0Retirement benefit liabilities 30 24.9 33.3Other non-current liabilities 17 31.2 18.7Provisions 19 23.6 15.1 443.8 421.9Net assets 810.0 700.9Shareholders' equityShare capital 22 25.5 25.4Share premium 23 294.1 292.1Retained earnings 24 397.4 288.1Other reserves 25 85.3 75.7Total shareholders' equity 802.3 681.3 Minority interest 26 7.7 19.6Total equity 810.0 700.9

The financial statements on pages 2 to 45 were approved by the board of directors on 5 March 2007.

Sir Ian Wood, Director

Allister G Langlands, Director

Group cash flow statement for the year to 31 December 2006

Note 2006 2005 US$m US$m Cash generated from operations 27 225.1 161.3Tax paid (57.0)

(37.2)

Net cash from operating activities 168.1 124.1 Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) 28 (26.0) (24.2)Acquisition of minority interests 28 (20.2) -Deferred consideration payments 28 (4.2) (9.2)

Disposal of subsidiaries (net of cash disposed) 4 7.3 22.8 Purchase of property plant and equipment

(76.5)

(56.4)

Proceeds from sale of property plant and equipment 8.4 4.2Purchase of intangible assets (9.8) (9.2) Net cash used in investing activities (121.0)

(72.0)

Cash flows from financing activitiesProceeds from issue of ordinary shares (net of 0.4 90.8

expenses)

Repayment of bank loans (17.5)

(18.6)

Disposal of shares in employee share trusts 1.4 1.7Interest received 4.5 2.5Interest paid (29.4)

(25.3)

Dividends paid to shareholders 7 (20.8)

(17.5)

Dividends paid to minority interest 26 (1.5) (1.3) Net cash (used in)/from financing activities (62.9) 32.3 Effect of exchange rate changes on cash and cash 6.2 (5.9)

equivalents

Net (decrease)/increase in cash and cash equivalents (9.6) 78.5

Opening cash and cash equivalents 149.9 71.4 Closing cash and cash equivalents 14 140.3 149.9

Notes to the financial statements for the year to 31 December 2006

Accounting PoliciesPreparation of accountsBasis of preparationThese financial statements have been prepared in accordance with IFRS andIFRIC interpretations adopted by the European Union (`EU') and with thoseparts of the Companies Act, 1985 applicable to companies reporting under IFRS.The Group financial statements have been prepared under the historical costconvention as modified by the revaluation of financial assets and liabilitiesheld for trading.The preparation of financial statements requires the use of estimates andassumptions that affect the reported amount of assets and liabilities at thedate of the financial statements and the reported amount of income andexpenses during the year. These estimates and assumptions are continuallyevaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under thecircumstances. Although these estimates are based on management's bestknowledge of the amount, event or actions, actual results ultimately maydiffer from those estimates.

Significant accounting policies

The Group's significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of consolidation

The Group financial statements are the result of the consolidation of thefinancial statements of the Group's subsidiary undertakings from the date ofacquisition or up until the date of disposal as appropriate. Subsidiaries areentities over which the Group has the power to govern the financial andoperating policies and generally accompanies a shareholding of more than onehalf of the voting rights. The Group's interests in joint ventures areaccounted for using proportional consolidation. Under this method the Groupincludes its share of each joint venture's income, expenses, assets,liabilities and cash flows on a line by line basis in the consolidatedfinancial statements. All Group companies apply the Group's accountingpolicies and prepare financial statements to 31 December.

Functional currency

The Group's earnings stream is primarily US dollars and the principal functional currency is the US dollar, being the most representative currency of the Group. The Group's financial statements are therefore prepared in US dollars.

Foreign currencies

Income statements of entities whose functional currency is not the US dollarare translated into US dollars at average rates of exchange for the period andassets and liabilities are translated into US dollars at the rates of exchangeruling at the balance sheet date. Exchange differences arising on translationof net assets in such entities held at the beginning of the year, togetherwith those differences resulting from the restatement of profits and lossesfrom average to year end rates, are taken to the currency translation reserve.In each individual entity, transactions in overseas currencies are translatedinto the relevant functional currency at the exchange rates ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are retranslated at the exchange rates ruling at the balance sheetdate. Any exchange differences are taken to the income statement.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate ruling at the balance sheet date.

The directors consider it appropriate to record sterling denominated equity share capital in the accounts of John Wood Group PLC at the exchange rate ruling on the date it was raised.

Revenue recognition

Revenue is measured at the fair value of the consideration received orreceivable. Revenue is recognised only when it is probable that the economicbenefits associated with a transaction will flow to the Group and the amountof revenue can be measured reliably. Revenue from services is recognised asthe services are rendered, including where they are based on contractual ratesper man hour in respect of multi-year service contracts. Incentive performancerevenues are recognised upon completion of agreed objectives. Revenue fromproduct sales is recognised when the significant risks and rewards ofownership have been transferred to the buyer, which is normally upon deliveryof products and customer acceptance, if any. Where revenue relates to amulti-element contract, then each element of the contract is accounted forseparately. Revenues are stated net of sales taxes and discounts.Revenue on lump-sum contracts for services, construction contracts and fixedprice long term service agreements, is recognised according to the stage ofcompletion reached in the contract by reference to the value of work done. Anestimate of the profit attributable to work completed is recognised once theoutcome of the contract can be estimated reliably. Expected losses arerecognised in full as soon as losses are probable. The net amount of costsincurred to date plus recognised profits less the sum of recognised losses andprogress billings is disclosed as trade receivables/trade payables.

Goodwill

The Group uses the purchase method of accounting to account for acquisitions.Goodwill represents the excess of the cost of an acquisition over the fairvalue of the net assets acquired. Goodwill is carried at cost less accumulatedimpairment losses.Other intangible assetsIntangible assets are carried at cost less accumulated amortisation.Intangible assets are recognised if it is probable that there will be futureeconomic benefits attributable to the asset, the cost of the asset can bemeasured reliably, the asset is separately identifiable and there is controlover the use of the asset. Where the Group acquires a business, otherintangible assets such as customer contracts are identified and evaluated todetermine the carrying value on the acquisition balance sheet. Otherintangible assets are amortised on a straight line basis over their estimateduseful lives, as follows:Computer software -3-5 years

Other intangible assets - 1-10 years

Property plant and equipment

Property plant and equipment (PP&E) is stated at cost less accumulated depreciation and impairment. No depreciation is charged with respect to freehold land and assets in the course of construction. Transfers from PP&E to current assets are undertaken at the lower of cost and net realisable value.

Depreciation is calculated using the straight line method over the following estimated useful lives of the assets:

Freehold and long leasehold buildings 25 - 50 years

Short leasehold buildings period of lease

Plant and equipment 3 - 10 years

When estimating the useful life of an asset group, the principal factors the Group takes into account are the durability of the assets, the intensity at which the assets are expected to be used and the expected rate of technological developments.

Impairment

The Group performs impairment reviews in respect of PP&E and other intangibleassets whenever events or changes in circumstance indicate that the carryingamount may not be recoverable. In addition, the Group carries out annualimpairment reviews in respect of goodwill. An impairment loss is recognisedwhen the recoverable amount of an asset, which is the higher of the asset'sfair value less costs to sell and its value in use, is less than its carryingamount.

For the purposes of impairment testing, goodwill is allocated to the appropriate cash generating unit ("CGU"). The CGU's are aligned to the business unit and sub-business unit structure the Group uses to manage its business. Cash flows are discounted in determining the value in use.

Inventories

Inventories, which include materials, work in progress and finished goods andgoods for resale, are stated at the lower of cost and net realisable value.Product based companies determine cost by weighted average cost methods usingstandard costing to gather material, labour and overhead costs. These costsare adjusted, where appropriate, to correlate closely the standard costs tothe actual costs incurred based on variance analysis. Service based companies'inventories consist of spare parts and other consumables. Serialised parts arecosted using the specific identification method and other materials aregenerally costed using the first in, first out method.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated selling expenses. Allowance is made for obsolete and slow-moving items, based upon annual usage.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and other short-term bank deposits with maturities of three months or less and bank overdrafts where there is a right of set-off. Bank overdrafts are included within borrowings in current liabilities where there is no right of set-off.

Trade receivables

Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. A provision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not be able to collectall amounts due according to the original terms of the receivables. The amountof the provision is the difference between the asset's carrying amount and thepresent value of estimated future cash flows, discounted at the effectiveinterest rate. The provision is determined by reference to previous experienceof recoverability for receivables in each market in which the Group operates.

Deferred consideration

Where it is probable that deferred consideration is payable on the acquisitionof a business based on an earn out arrangement, an estimate of the amountpayable is made at the date of acquisition and reviewed regularly thereafter,with any change in the estimated liability being reflected in goodwill.

Taxation

The tax charge represents the sum of tax currently payable and deferred tax.Tax currently payable is based on the taxable profit for the year. Taxableprofit differs from the profit reported in the income statement due to itemsthat are not taxable or deductible in any period and also due to items thatare taxable or deductible in a different period. The Group's liability forcurrent tax is calculated using tax rates enacted or substantively enacted atthe balance sheet date.Deferred income tax is provided, using the full liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. The principaltemporary differences arise from depreciation on PP&E, tax losses carriedforward and, in relation to acquisitions, the difference between the fairvalues of the net assets acquired and their tax base. Tax rates enacted, orsubstantially enacted, by the balance sheet date are used to determinedeferred income tax.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date the contract isentered into and are subsequently remeasured at their fair value. The methodof recognising the resulting gain or loss depends on whether the derivative isdesignated as a hedging instrument, and if so, the nature of the item beinghedged. The Group designates certain derivatives as either: (1) hedges of thefair value of recognised assets or liabilities or a firm commitment (fairvalue hedge); (2) hedges of highly probable forecast transactions (cash flowhedge); or (3) hedges of net investments in foreign operations (net investmenthedge).

Where hedging is to be undertaken, the Group documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as its risk management objective and strategy for undertaking the hedge transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Group performs effectiveness testing on a quarterly basis.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges is recognised in equity. The gainor loss relating to the ineffective portion is recognised immediately in theincome statement.

Amounts accumulated in equity are recycled through the income statement in periods when the hedged item affects profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or liability, the cost of the asset or liability is adjusted by the gains or losses previously held in equity.

When a hedging instrument expires or is sold, or when a hedge no longer meetsthe criteria for hedge accounting, any cumulative gain or loss existing inequity at that time remains in equity and is recognised when the forecasttransaction is ultimately recognised in the income statement. When a forecasttransaction is no longer expected to occur, the cumulative gain or loss thatwas reported in equity is immediately transferred to the income statement.

Net investment hedge

Hedges of net investments in foreign operations are accounted for similarly tocash flow hedges. Any gain or loss on the hedging instrument relating to theeffective portion of the hedge is recognised in equity; the gain or lossrelating to the ineffective portion is recognised immediately in the incomestatement. Gains and losses accumulated in equity are included in the incomestatement when the foreign operation is disposed of.

Derivatives that do not qualify for hedge accounting

Certain derivatives, whilst providing effective economic hedges under the Group's treasury policy are not designated as hedges. Changes in the fair value of any derivative instruments that are not designated for hedge accounting are recognised immediately in the income statement.

Fair value estimation

The fair value of interest rate swaps is calculated as the present value oftheir estimated future cash flows. The fair value of forward foreign exchangecontracts is determined using forward foreign exchange market rates at thebalance sheet date. The carrying values of trade receivables and payablesapproximate to their fair values. The fair value of financial liabilities isestimated by discounting the future contractual cash flows at the currentmarket interest rate that is available to the Group for similar financialinstruments.Operating leasesAs lessee

Payments made under operating leases are charged to the income statement on astraight line basis over the period of the lease. Benefits received andreceivable as an incentive to enter into an operating lease are also spread ona straight line basis over the period of lease.

As lessor

Operating lease rental income arising from leased assets is recognised in the income statement on a straight line basis over the period of the lease.

Finance leases

As lessee

Assets held under finance leases are capitalised as PP&E and depreciated overthe shorter of the lease term and the asset's useful life. The capital elementof the future lease obligation is recorded as a liability, with the interestelement charged to the income statement over the period of the lease so as toproduce a constant rate of charge on the capital outstanding.

As lessor

Finance lease rental income arising from leased assets is recognised in the income statement so as to produce a constant rate of return on the net cash investment. Amounts receivable under finance leases represent the outstanding amounts due under these agreements less amounts allocated to future periods.

Retirement benefit liabilities

The Group operates a defined benefit scheme and a number of definedcontribution schemes and these are accounted for under IAS 19 `EmployeeBenefits'. The liability recognised in respect of the defined benefit schemerepresents the present value of the defined benefit obligations less the fairvalue of the scheme assets. The assets of this scheme are held in separatetrustee administered funds. The defined benefit scheme's assets are measuredusing market values. Pension scheme liabilities are measured annually by anindependent actuary using the projected unit method and discounted at thecurrent rate of return on a high quality corporate bond of equivalent term andcurrency to the liability. The increase in the present value of theliabilities of the Group's defined benefit pension scheme expected to arisefrom employee service in the period is charged to operating profit. Theexpected return on the scheme assets and the increase during the period in thepresent value of the scheme's liabilities arising from the passage of time areincluded in finance income/expense. Actuarial gains and losses are recognisedin the Group statement of recognised income and expense in full in the periodin which they occur.The defined benefit scheme's surpluses, to the extent that they are consideredrecoverable, or deficits are recognised in full and presented on the face ofthe balance sheet.

The Group's contributions to defined contribution schemes are charged to the income statement in the period to which the contributions relate.

Provisions

Provision is made for the estimated liability on all products and servicesstill under warranty, including claims already received, based on pastexperience. Other provisions are recognised where the Group is deemed to havea legal or constructive obligation, it is probable that a transfer of economicbenefits will be required to settle the obligation, and a reliable estimate ofthe obligation can be made.

Share based charges relating to employee share schemes

The Group has a number of employee share schemes:-

Share options granted under Executive Share Option Schemes (`ESOS') are granted at market value. A charge is booked to the income statement as an employee benefit expense for the fair value of share options expected to be exercised, accrued over the vesting period. The corresponding credit is taken to retained earnings. The fair value is calculated using an option pricing model.

Share options granted under the Long Term Retention Plan (`LTRP') are granted at par value. The charge to the income statement for LTRP shares is also calculated using an option pricing model and, as with ESOS grants, the fair value of the share options expected to be exercised is accrued over the vesting period. The corresponding credit is also taken to retained earnings.

The Group also has a Long Term Incentive Scheme (`LTIS') for directors and keysenior executives. Participants are awarded shares dependent on theachievement of certain performance targets. The charge to the income statementfor shares expected to be awarded under the LTIS is based on the fair value ofthose shares at the grant date, spread over the vesting period. Thecorresponding credit is taken to retained earnings. For those awards that havea market related performance measure, the fair value of the market relatedelement is calculated using a Monte Carlo simulation model.

Proceeds received on the exercise of share options are credited to share capital and share premium.

Share capital

John Wood Group PLC has one class of ordinary shares and these are classifiedas equity. Dividends on ordinary shares are not recognised as a liability orcharged to equity until they have been approved by shareholders.The Group is deemed to have control of the assets, liabilities, income andcosts of its employee share ownership trusts (`ESOP trusts'). They havetherefore been consolidated in the financial statements of the Group. Sharesacquired by and disposed of by the ESOP trusts are recorded at cost. The costof shares held by the ESOP trusts is deducted from shareholders' equity.

Segmental reporting

The Group's primary reporting segments are its three operating divisions, namely Engineering & Production Facilities, Well Support and Gas Turbine Services.

Engineering & Production Facilities provides a broad range of life-of-fieldengineering, modifications, maintenance and operations services to oil and gascustomers worldwide. Well Support supplies solutions, products and services toincrease production rates and recovery from oil and gas reservoirs. It isamong the market leaders worldwide in artificial lift using electricsubmersible pumps, in the provision of surface wellheads and valves and, inthe Gulf of Mexico and in parts of South America, in the provision of electricwireline and slickline services. Gas Turbine Services is a world leadingindependent provider of maintenance, repair and overhaul services forindustrial gas turbines and related high speed rotating equipment used forcompression, transmission and power generation in the oil and gas and powergeneration industries.

Disclosure of impact of new and future accounting standards

The following standards, amendments and interpretations to published standardswere mandatory for the year ended 31 December 2006. The application of thesestandards did not have a material impact on the financial statements.

IAS 21 (Amendment) Net investment in a foreign operation

IAS 39 (Amendment) Cash flow hedge accounting of forecast intragroup transactions

IAS 39 (Amendment) The fair value option

IAS 39 and IFRS 4 (Amendment) Financial guarantee contracts

IFRS 1 (Amendment) First time adoption of international financial reporting standards

IFRIC 4 Determining whether an arrangement contains a lease

The Group has not yet adopted the following standards which are only effective for periods commencing on or after 1 January 2007.

IFRS 7 `Financial Instruments: Disclosures'

This standard consolidates IAS 30 and the disclosure requirements of IAS 32 relating to financial instruments. We do not anticipate that this standard will have any material impact on the Group's financial statements.

IFRS 8 `Operating Segments'

This standard replaces IAS 14 `Segment Reporting' and proposes that entities adopt a `management approach' to reporting financial performance. We do not anticipate that this standard will have any material impact on the Group's financial statements.

1 Segmental reporting

Primary reporting format - business segments

Revenues EBITDA(1) EBITA(1) Operating profit Year Year Year ended Year Year ended Year ended ended ended Year ended ended Year ended 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2006 31 Dec 2005 2006 2005 2006 31 Dec 2005 2006 31 Dec 2005 US$m US$m US$m US$m US$m US$m US$m US$m

Engineering & Production Facilities 1,972.7 1,472.3 155.3 98.7

141.9 88.2 138.0 86.0Well Support (2) 739.1 645.7 93.9 76.3 73.6 58.5 73.5 68.0Gas Turbine Services 713.7 607.8 54.1 47.8 38.0 32.7 34.7 24.9Central costs (5) - - (37.7)

(28.8) (38.4) (29.5) (38.5) (29.8)

Total excluding discontinuingoperations 3,425.5 2,725.8 265.6 194.0

215.1 149.9 207.7 149.1

Gas Turbine Services - discontinuingoperations (3) 43.3 36.1 0.9 (0.1) - (0.8) (0.2) (1.1) 3,468.8 2,761.9 266.5 193.9 215.1 149.1 207.5 148.0 Finance income 5.3 2.5Finance expense (29.2) (25.8)

Profit before taxation

183.6 124.7 Taxation (62.4) (41.1) Profit for the year 121.2 83.6NotesEBITDA represents operating profit of US$207.5m (2005 : US$148.0m) beforeprofit on disposal of subsidiaries of US$nil (2005 : US$9.7m), impairment andrestructuring charges of US$nil (2005 : US$6.0m), depreciation of US$51.4m(2005 : US$44.8m) and amortisation of US$7.6m (2005 : US$4.8m). EBITArepresents EBITDA less depreciation. EBITA and EBITDA are provided as they areunits of measurement used by the Group in the management of its business.

Well Support's results include revenues of US$nil (2005 : US$37.5m) and operating profit of US$nil (2005 : US$5.0m) earned by the Production Technology business prior to its disposal in December 2005.

The discontinuing operations relate to an Aero engine overhaul company which the Group has decided to divest.

Revenues arising from sales between segments are not material.

5 Central costs include the costs of central management personnel in both the UK and the US, along with an element of Group infrastructure costs.

Segment assets and liabilities

Engineering Gas & Production Turbine DiscontinuingAt 31 December 2006 Facilities Well Support

Services Operations Unallocated Total

US$m US$m US$m US$m US$m US$m Segment assets 741.4 498.2 594.0 43.6 167.5 2,044.7 Segment liabilities 403.3 160.3 175.3 7.5 488.3 1,234.7 At 31 December 2005 Segment assets 568.2 432.2 518.7 34.7 159.0 1,712.8 Segment liabilities 264.5 132.8 145.2 7.8 461.6 1,011.9

Segment assets and liabilities are presented before the elimination of inter-segment trading balances. Unallocated assets and liabilities includes income tax, deferred tax and cash and borrowings where this relates to the financing of the Group's operations.

Other segment items Engineering Gas & Production Turbine Discontinuing2006 Facilities Well Support

Services Operations Unallocated Total

US$m US$m US$m US$m US$m US$mCapital expenditure- Property plant and equipment 15.0 36.0 23.1

2.3 0.1 76.5- Intangible assets 3.8 0.2 5.8 - - 9.8Non-cash expenses- Depreciation 13.4 20.3 16.1 0.9 0.7 51.4

- Amortisation of other intangible assets 3.9 0.1 3.3

0.2 0.1 7.6- Other 1.6 8.0 2.7 - - 12.3 2005 US $m US $m US $m US $m US $m US $mCapital expenditure

- Property plant and equipment 10.2 28.1 15.2

2.5 0.5 56.5- Intangible assets 3.9 0.1 5.2 - - 9.2Non-cash expenses- Depreciation 10.5 17.8 15.1 0.7 0.7 44.8

- Amortisation of other intangible assets 2.2 0.2 1.8 0.3 0.3 4.8- Impairment - property plant and equipment - - 1.7 - - 1.7- Other 1.5 0.7 1.4

- - 3.6

Secondary format - geographical segments

Revenues Segment assets Capital expenditure 2006 2005 2006 2005 2006 2005 US$m US$m US$m US$m US$m US$m Europe 1,031.3 885.4 486.0 391.7 18.1 16.1North America 1,514.2 1,103.9 1,059.6 878.1 51.7 29.2Rest of the World 923.3 772.6 499.1 443.0 16.5 20.4 3,468.8 2,761.9 2,044.7 1,712.8 86.3 65.7 2006 2005 US$m US$m

Revenues by category are as follows:

Sale of goods 550.5 485.0Rendering of services 2,918.3 2,276.9 3,468.8 2,761.92 Finance expense/(income) 2006 2005 US$m US$m Interest payable on bank borrowings 29.2 25.7Other interest payable (note 30) - 0.1 Finance expense 29.2 25.8

Interest receivable on short term deposits (4.5) (2.5) Other interest income (note 30)

(0.8) - Finance income (5.3) (2.5) Finance expense - net 23.9 23.33 Profit before taxation 2006 2005 US$m US$m

The following items have been charged/(credited) in arriving at profit before taxation:

Employee benefits expense (note 29) 1,276.0 966.3

Cost of inventory recognised as an expense (included in cost 287.4 244.7 of sales) Impairment of inventory

14.6 7.6Depreciation of property plant and equipment 51.4 44.8Amortisation of other intangible assets 7.6 4.8

(Gain)/loss on disposal of property plant and equipment (1.4) 0.5 Other operating lease rentals payable: - Plant and machinery

13.8 11.0- Property 41.4 29.6

Net exchange loss/(gain) on foreign currency borrowings less 13.8 (5.5) deposits Gain on fair value of unhedged derivative financial

(0.6) (0.9)

instruments

Services provided by the Group's auditor and network firms

During the year the Group obtained the following services from its auditor atcosts as detailed below: 2006 2005 US$m US$m Audit services- Fees payable for audit of parent company and consolidated 0.8 0.9accountsNon-audit servicesFees payable to the company's auditor and its associates forother services:- Audit of subsidiary companies pursuant to legislation 1.0 1.0- Tax services 0.3 0.2- Other services 0.1 0.1 2.2 2.2

4 Profit on disposal of subsidiaries

2006 2005 US$m US$m Profit on disposal of subsidiaries - 9.7

In December 2005, the Group disposed of its Production Technology business which was part of the Well Support division. US$22.8m of the proceeds were received in December 2005 with the balance of US$7.3m being paid in February 2006.

5 Impairment and restructuring charges

2006 2005 US$m US$m Impairment and restructuring charges - 6.0

The 2005 impairment and restructuring charge of US$6.0m was in respect of rationalisation of businesses and facilities, severance costs and impairment of property plant and equipment in the Gas Turbine Services division.

6 Taxation 2006 2005 US$m US$mCurrent tax- Current year 85.7 46.5

- Adjustment in respect of prior years (4.9) (5.1) 80.8 41.4Deferred taxRelating to origination and reversal of temporary differences (18.4) (0.3) Total tax charge 62.4 41.1 Tax on items charged to equity 2006 2005 US$m US$m

Deferred tax movement on retirement benefit liabilities 2.6 (0.7) Current tax credit on exchange movements offset in reserves (3.2) -

(0.6) (0.7)Tax is calculated at the rates prevailing in the respective jurisdictions inwhich the Group operates. The expected rate is the weighted average ratetaking into account the Group's profits in these jurisdictions. The expectedrate has increased in 2006 due to the change in profitability of the Group'ssubsidiaries in their respective jurisdictions. The tax for the year is lower(2005 : lower) than the rate of corporate tax expected due to the following

factors: 2006 2005 US$m US$m Profit before taxation 183.6 124.7

Profit before tax at expected rate of 36.4% (2005: 34.2%) 66.8 42.6 Effects of: Adjustments in respect of prior years

(4.9) (5.1)Non-recognition of losses and other attributes 7.4 5.4Other permanent differences (6.9) (1.8) Total tax charge 62.4 41.17 Dividends 2006 2005 US$m US$mDividends on equity sharesFinal dividend paid - year ended 31 December 2005 : 2.7 cents 13.4 11.1(2005: 2.4 cents) per shareInterim dividend paid - year ended 31 December 2006 : 1.5 7.4 6.4cents (2005: 1.3 cents) per share 20.8 17.5The directors are proposing a final dividend in respect of the financial yearended 31 December 2006 of 3.5 cents per share which will absorb an estimatedUS$17.4m of shareholders' funds. The final dividend will be paid on 24 May2007 to shareholders who are on the register of members on 4 May 2007. Thefinancial statements do not reflect this dividend payable.8 Earnings per share 2006 2005 Earnings Earnings

Earnings attributable Number of Earnings

attributable to Number of per to equity shares per equity shares share shareholders share shareholdersUS$m (millions) (cents) US$m (millions) (cents) Basic 120.5 494.7 24.4 80.5 473.4 17.0 Effect of dilutive ordinary shares - 19.4 (1.0) - 17.8 (0.6) Diluted 120.5 514.1 23.4 80.5 491.2 16.4 Amortisation, net of tax 5.4 - 1.1 4.8 - 1.0

Profit on disposal of subsidiaries, net of - - - (7.9) - (1.6)taxImpairment and restructuring charges, net - - -

4.2 - 0.8of tax Adjusted diluted 125.9 514.1 24.5 81.6 491.2 16.6 Adjusted basic 125.9 494.7 25.4 81.6 473.4 17.2

The calculation of basic earnings per share for the year ended 31 December2006 is based on the earnings attributable to equity shareholders divided bythe weighted average number of ordinary shares in issue during the yearexcluding shares held by the Group's employee share ownership trusts. For thecalculation of diluted EPS, the weighted average number of ordinary shares inissue is adjusted to assume conversion of all potentially dilutive ordinaryshares. The Group has two types of dilutive ordinary shares - share optionsgranted to employees under Executive Share Option Schemes and the Long TermRetention Plan; and shares issuable under the Group's Long Term IncentiveScheme. Adjusted EPS is disclosed to show the results excluding the impact ofamortisation, impairment and restructuring charges and profit on disposal ofsubsidiaries, net of tax.

9 Goodwill and other intangible assets

Computer software Goodwill Other Total US$m US$m US$m US$mCostAt 1 January 2006 312.5 22.1 16.7 351.3Exchange differences 4.8 1.9 0.7 7.4Additions - 5.1 4.7 9.8Acquisitions 38.4 - 8.2 46.6Reclassification from property, - - 0.9 0.9plant and equipmentReclassification from current - - 1.6 1.6assetsAt 31 December 2006 355.7 29.1 32.8 417.6 Aggregate amortisation and 0.4 13.1 9.2 22.7impairment At 1 January 2006Exchange differences - 1.3 0.5 1.8Charge for the year - 3.9 3.7 7.6At 31 December 2006 0.4 18.3 13.4 32.1

Net book value at 31 December 2006 355.3 10.8 19.4 385.5

CostAt 1 January 2005 297.5 16.9 13.8 328.2Exchange differences (3.7) (1.5) (0.5) (5.7)Additions - 6.7 2.5 9.2Acquisitions 18.7 - 0.9 19.6At 31 December 2005 312.5 22.1 16.7 351.3 Aggregate amortisation and 0.4 10.6 8.3 19.3impairment At 1 January 2005Exchange differences - (1.0) (0.4) (1.4)Charge for the year - 3.5 1.3 4.8At 31 December 2005 0.4 13.1 9.2 22.7

Net book value at 31 December 2005 312.1 9.0 7.5 328.6

In accordance with IAS 36 `Impairment of assets', goodwill was tested forimpairment during the year. The impairment tests were carried out on a CashGenerating Unit (`CGU') basis using the budgeted cash flows for 2007/8. Cashflows for 2009-11 are assumed to grow at a rate of 5% per annum. Subsequentcash flows have been assumed to grow at 3% per annum. The cash flows have beendiscounted using a pre-tax discount rate of 10%. No impairment of goodwill isrequired in 2006.

The carrying amounts of goodwill by division are: Engineering & Production Facilities US$234.4m (2005 : US$191.9m), Gas Turbine Services US$87.4m (2005 : US$86.7m) and Well Support US$33.5m (2005 : US$33.5m).

Other includes development costs, licences and customer contracts. Development costs with a net book value of US$8.7m (2005 : US$3.1m) are internally generated intangible assets.

10 Property plant and equipment

Land and Land and buildings buildings - - Long Short leasehold leasehold and Plant and freehold equipment Total US$m US$m US$m US$mCostAt 1 January 2006 52.1 15.9 372.2 440.2Exchange differences 0.5 1.0 12.1 13.6Additions 1.4 1.5 73.6 76.5Acquisitions - - 3.2 3.2Disposals (0.7) (0.1) (14.8) (15.6)Reclassification as other - - (0.9) (0.9)intangible assetsReclassification as current - - (1.7) (1.7)assets At 31 December 2006 53.3 18.3 443.7 515.3 Accumulated depreciation andimpairmentAt 1 January 2006 18.6 8.7 193.4 220.7Exchange differences 0.1 0.5 7.6 8.2Charge for the year 2.8 1.5 47.1 51.4Disposals (0.4) (0.1) (8.6) (9.1)

Reclassification as current assets - - (3.8) (3.8)

At 31 December 2006 21.1 10.6 235.7 267.4

Net book value at 31 December 2006 32.2 7.7 208.0 247.9

CostAt 1 January 2005 49.8 15.9 350.7 416.4Exchange differences (0.7) (0.6) (9.1) (10.4)Additions 4.6 1.0 50.9 56.5Acquisitions 1.7 - 1.8 3.5Disposals (3.3) (0.4) (13.2) (16.9)Company sold - - (2.1) (2.1)

Reclassification as current assets - - (6.8) (6.8)

At 31 December 2005 52.1 15.9 372.2 440.2 Accumulated depreciation andimpairmentAt 1 January 2005 16.8 7.9 175.5 200.2Exchange differences (0.8) (0.2) (5.5) (6.5)Charge for the year 3.1 1.1 40.6 44.8Acquisitions 0.2 - 0.4 0.6Impairment - 0.3 1.4 1.7Disposals (0.7) (0.4) (10.1) (11.2)Company sold - - (1.1) (1.1)

Reclassification as current assets - - (7.8) (7.8)

At 31 December 2005 18.6 8.7 193.4 220.7

Net book value at 31 December 2005 33.5 7.2 178.8 219.5

Plant and equipment includes assets held for lease to customers under operating leases of US$37.4m (2005: US$33.0m). Additions during the year amounted to US$12.4m (2005 : US$12.0m) and depreciation totalled US$9.1m (2005 : US$7.0m). The gross cost of these assets at 31 December 2006 is US$52.3m (2005 : US$41.9m) and aggregate depreciation is US$14.9m (2005 : US$8.9m).

Impairment is included in the `impairment and restructuring charges' line in the income statement (see note 5).

Property plant and equipment includes assets in the course of construction of US$11.6m (2005 : US$10.8m).

11 Joint ventures

In relation to the Group's interests in joint ventures, its share of assets, liabilities, income and expenses is shown below.

2006 2005 US$m US$m Non-current assets 55.4 56.2Current assets 218.4 200.2Non-current liabilities (8.8) (15.6)Current liabilities (162.7) (150.4) Net assets 102.3 90.4 Income 397.5 315.8Expenses (366.8) (286.9) Profit before tax 30.7 28.9Tax (8.8) (7.6)

Share of post tax results from joint ventures 21.9 21.3

The joint ventures have no significant contingent liabilities to which theGroup is exposed, nor has the Group any significant contingent liabilities inrelation to its interest in the joint ventures other than the bank guaranteesdescribed in note 32.12 Inventories 2006 2005 US$m US$m Materials 74.5 76.3Work in progress 69.1 58.9Finished goods and goods for resale 280.5 227.7 424.1 362.9

13 Trade and other receivables

2006 2005 US$m US$m Trade receivables 691.2 514.7Less: provision for impairment (23.6) (11.4) Trade receivables - net 667.6 503.3Amounts recoverable on contracts 15.2 11.2

Amounts receivable under finance leases 7.8 9.9 Prepayments and accrued income

54.8 36.7Other receivables 47.1 49.6 792.5 610.7

Total amounts receivable under finance leases, including amounts allocated tofuture periods of US$1.3m (2005 : US$3.9m) is US$11.4m (2005 : US$21.3m).Rentals receivable during the year under finance leases amounted to US$12.4m(2005 : US$13.6m). Amounts receivable under finance leases of US$3.6m (2005 :US$11.4m) are included in long term receivables.14 Cash and cash equivalents 2006 2005 US$m US$m Cash at bank and in hand 85.8 75.7Short-term bank deposits 54.5 74.2 140.3 149.9

The effective interest rate on short-term deposits was 5.3% (2005 : 4.3%) and these deposits have an average maturity of 91 days (2005 : 32 days).

15 Trade and other payables 2006 2005 US$m US$m Trade payables 255.4 192.8Other tax and social security payable 40.6 27.9Accruals and deferred income 384.7 277.1Deferred consideration 12.6 3.9Other payables 17.5 25.0 710.8 526.7

16 Financial liabilities - borrowings

2006 2005 US$m US$m Bank loans and overdrafts due within one year or on demandUnsecured 41.5 47.9 Non-current bank loansUnsecured 356.7 347.8

Bank loans are denominated in a number of currencies and bear interest based on LIBOR or foreign equivalents appropriate to the country in which the borrowing is incurred.

The effective interest rates on the Group's borrowings at the balance sheetdate were as follows: 2006 2005 % % US Dollar 5.77 4.76Sterling 5.74 5.17Euro 4.14 2.75Australian Dollar 6.77 6.03Canadian Dollar 4.93 4.02The carrying amounts of the Group's borrowings are denominated in thefollowing currencies: 2006 2005 US$m US$m US Dollar 190.3 246.2Sterling 117.8 61.3Euro 22.6 17.1Australian Dollar 4.5 7.3Canadian Dollar 43.7 48.8Other 19.3 15.0 398.2 395.7

17 Other non-current liabilities

2006 2005 US$m US$m Deferred consideration 24.2 13.2Other payables 7.0 5.5 31.2 18.7

Deferred consideration represents amounts payable on acquisitions made by the Group and is expected to be paid over the next four years.

18 Financial instruments

The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and these are summarised below.

Interest rate risk

The Group finances its operations through a mixture of retained profits andbank borrowings. The Group borrows in the desired currencies at floating ratesof interest and then uses interest rate swaps as cash flow hedges to generatethe desired interest profile and to manage the Group's exposure to interestrate fluctuations. The Group's long-term policy is to maintain approximately50% of its borrowings at fixed rates of interest. At 31 December 2006,approximately 51% (2005 : 45%) of the Group's borrowings were at fixed ratesafter taking account of interest rate swaps.

Liquidity risk

As regards liquidity, the Group's policy has throughout the year been that, toensure continuity of funding, at least 90% of the Group borrowing facilities(excluding joint ventures) should mature in more than one year. At 31 December2006, 96% (2005 : 96%) of the Group borrowing facilities were due to mature

inmore than one year.Foreign currency riskThe Group is exposed to foreign exchange risk arising from various currencies.The Group also has significant overseas subsidiaries whose revenues andexpenses are denominated in other currencies. In order to protect the Group'sbalance sheet from movements in exchange rates, the Group finances its netinvestment in non US dollar subsidiaries primarily by means of borrowingsdenominated in the appropriate currency.Some of the sales of the Group's businesses are to customers in overseaslocations. Where possible, the Group's policy is to eliminate all significantcurrency exposures on sales at the time of the transaction through forwardcurrency contracts. Where the Group does not hedge account for these forwardcontracts, changes in the forward contract fair values are booked through theincome statement.

The Group carefully monitors the economic and political situation in the countries in which it operates to ensure appropriate action is taken to minimise any foreign currency exposure.

Credit risk

The Group's credit risk primarily relates to its trade receivables. The Group's major customers are typically large companies which have strong credit ratings assigned by international credit rating agencies. The Group has a broad customer base and management believe that no further credit risk provision is required in excess of the provision for impairment of receivables.

Price risk

The Group is not exposed to any significant price risk in relation to its financial instruments.

Numerical financial instrument disclosures are set out below.

The book value and net fair value of the Group's derivative financial instruments at the balance sheet date were as follows:

2006 2005 US$m US$mContracts with positive fair values:Interest rate swaps 3.0 1.5Forward foreign currency contracts 0.9 1.5 3.9 3.0Contracts with negative fair values:Interest rate swaps (0.3) (0.1)Forward foreign currency contracts (0.2) (0.5)Currency options (0.5) - (1.0) (0.6)

These amounts are disclosed in the financial statements as follows:

2006 2005 US$m US$m Non-current assets 2.6 1.3Current assets 1.3 1.7 3.9 3.0 Non-current liabilities 0.1 -Current liabilities 0.9 0.6 1.0 0.6Interest rate swaps

The notional principal amount of the Group's outstanding interest rate swap contracts at 31 December 2006 was US$203.9m (2005 : US$180.0m).

At 31 December 2006 the fixed interest rates varied from 2.7% to 5.2% (2005 :2.7% to 5.0%) and the floating rate was 5.8% including margin (2005 : 5.0%).The Group interest rate swaps are for periods of 5 years and they expirebetween 2007 and 2010 with the exception of one US$25m swap which is a 10 yearswap expiring in 2012. The bank has a break option on the 10 year swap in2007. The bank also has a break option on a US$25m 5 year swap. This option isexercisable on a quarterly basis.

The fair value gains and losses relating to the interest rate swaps and which are deferred in equity at 31 December will reverse in the income statement over the term of the swaps.

Net investment in foreign entities

The Group has foreign currency borrowings which it has designated as a hedge of subsidiary company net assets. The fair value of the borrowings at 31 December 2006 was US$137.5m (2005 : US$78.3m). The foreign exchange loss of US$14.3m (2005 : gain US$2.1m) on translation of the borrowings into US dollars has been recognised in the currency translation reserve.

Fair value of non-derivative financial assets and financial liabilities

Where market values are not available, fair values of non-derivative financialassets and financial liabilities have been calculated by discounting expectedfuture cash flows at prevailing interest rates and by applying year endexchange rates.The fair value of short-term borrowings, trade and other payables, trade andother receivables, short-term deposits and cash at bank and in handapproximates to the carrying amount because of the short maturity of interestrates in respect of these instruments. Long-term borrowings are generallyrolled over for periods of three months or less.

Fair value of long-term borrowings

2006 2005 Book value Fair value Book value Fair value US$m US$m US$m US$m

Long-term borrowings (note 16) (356.7) (356.7) (347.8) (347.8)

Fair value of other financial assetsand financial liabilities Primary financial instruments heldor issued to finance the Group'soperations: Trade and other receivables (note 792.5 792.5 610.7 610.713)Cash at bank and in hand (note 14) 85.8 85.8 75.7 75.7Short-term deposits (note 14) 54.5 54.5 74.2 74.2Trade and other payables (note 15) (710.8) (710.8) (526.7) (526.7)Short-term borrowings (note 16) (41.5) (41.5) (47.9) (47.9)Other non-current liabilities (note (31.2) (31.2) (18.7) (18.7)17)Maturity of financial liabilities

The maturity profile of the carrying amount of the Group's non-current liabilities at 31 December was as follows:

2006 2005 Borrowings Other Total Borrowings Other Total US$m US$m US$m US$m US$m US$mIn more than one year but not more than twoyears

1.6 13.9

- 20.4 20.4 15.5In more than two years but not more thanfive years 346.2 4.8 351.0 356.7 10.8 367.5 356.7 31.2 387.9 347.8 18.7 366.5 Borrowing facilitiesThe Group has the following undrawn committed borrowing facilities availableat 31 December in respect of which all conditions precedent had been met atthat date: 2006 2005 US$m US$mExpiring within one year 23.6 8.3Expiring between one and two years 8.9 -

Expiring in more than two years but not more than five years 409.4 421.1

441.9 429.4All undrawn borrowing facilities are floating rate facilities. The facilitiesexpiring within one year are annual facilities subject to review at variousdates during 2007. The facilities have been arranged to help finance theGroup's activities. All these facilities incur commitment fees at marketrates.19 Provisions Warranty provisions Other Total US$m US$m US$m At 1 January 2006 11.5 3.6 15.1Exchange differences 0.4 - 0.4Charge to income statement 7.2 6.8 14.0Payments during the year (5.6) (0.3) (5.9) At 31 December 2006 13.5 10.1 23.6Warranty provisions

These provisions are recognised in respect of guarantees provided in the normal course of business relating to contract performance. They are based on previous claims history and it is expected that most of these costs will be incurred over the next two years.

Other provisions

At 31 December 2006, other provisions of US$10.1m (2005 : US$3.6m) have beenrecognised. This amount includes provisions for future losses on two overseasonerous contracts and a provision for non-recoverable overseas indirect taxes.It is expected that most of the costs in relation to these provisions will beincurred over the next two years.

20 Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using the tax rate applicable to the territory in which the asset or liability has arisen.

The movement on the deferred tax account is shown below:

2006 2005 US$m US$m At 1 January (12.3) (12.3)Exchange differences (1.2) 1.0Credit to income statement (18.4) (0.3)

Deferred tax relating to retirement benefit liabilities 2.6 (0.7) At 31 December (29.3) (12.3) The deferred tax account is presented in the financialstatements as follows: Deferred tax assets (36.6) (19.3)Deferred tax liabilities 7.3 7.0 (29.3) (12.3)No deferred tax is recognised on the unremitted earnings of overseassubsidiaries and joint ventures. As these earnings are continually reinvestedby the Group, no tax is expected to be payable on them in the foreseeablefuture. If the earnings were remitted, tax of US$20.1m (2005 : US$17.3m) wouldbe payable.

The Group has unrecognised tax losses of US$44.3m (2005 : US$39.3m) to carry forward against future taxable income.

Deferred tax assets and liabilities are only offset where there is a legallyenforceable right of offset and there is an intention to settle the balancesnet. The deferred tax balances are analysed below:- Accelerated tax depreciation Other Total US$m US$m US$m Deferred tax assets 10.0 (46.6) (36.6)Deferred tax liabilities 4.6 2.7 7.3

Net deferred tax (asset)/liability 14.6 (43.9) (29.3) 21 Share based charges

The Group currently has three types of share based payment scheme, namely Executive Share Option Schemes (`ESOS'), the Long Term Retention Plan (`LTRP') and the Long Term Incentive Scheme (`LTIS'). Details of each of the schemes are given in the Directors' Remuneration Report and in note 22.

The charge in the Group income statement for these schemes is US$9.7m (2005 : US$7.9m)

The assumptions made in arriving at the charge for each scheme are given below:

ESOS and LTRP

There are currently 490 employees participating in these schemes. For thepurposes of calculating the fair value of the options a Black-Scholes optionpricing model has been used. Based on past experience, it has been assumedthat options will be exercised, on average, six months after the earliestexercise date, which is four years after grant date, and there will be a lapserate of 20%-25%. The share price volatility used of 35%-40% is based on theactual volatility of the Group's shares since IPO as well as that ofcomparable companies. The risk free rate of return of 4%-5% is based on theimplied yield available on zero coupon gilts with a term remaining equal tothe expected lifetime of the options at the date of grant. A dividend yield of1.0% has been used in the calculation.The fair value of options granted under the ESOS during the year was ‚£0.87(2005 : ‚£0.45). The fair value of options granted under the LTRP during theyear ranged from ‚£2.25 to ‚£2.51 (2005 : ‚£1.37 to ‚£1.72). The weighted averageremaining contractual life of share options at 31 December 2006 is 6.0 years.

LTIS

The actual performance for 2006 on the two non-market related performancetargets has been assumed to continue for the remainder of the three year cycleand the share based charge is calculated using a fair value of ‚£1.40. Thecharge for the market related performance target has been calculated using aMonte Carlo simulation model using similar assumptions to the ESOS and LTRP

calculations.22 Share capital 2006 2005Authorised US$m US$m 720,000,000 (2005: 720,000,000) ordinary shares 34.9 34.9of 3 1/3 pence 2006 2005 shares US$m shares US$mIssued and fully paid Ordinary shares of 3 1/3penceeachAt 1 January 515,237,930 25.4 483,531,380 23.5Issue of new shares 375,000 - 24,356,550 1.5

Allocation of shares to employee 1,020,000 0.1 7,350,000 0.4 share trusts

At 31 December 516,632,930 25.5 515,237,930 25.4During the year 375,000 ordinary shares of 3 1/3pence were issued at pricesvarying from 17 1/3 pence per share to 93 1/3pence per share, on the exerciseof options granted under the John Wood Group PLC 1994 Approved Executive ShareOption Scheme and the John Wood Group 1996 Unapproved Executive Share OptionScheme.

Executive Share Option Schemes

The following options to subscribe for new or existing shares were outstandingat 31 December: Number of ordinary shares under Exercise option priceYear ofGrant 2006 2005 (per share) Exercise period 1998 46,290 121,290 15 2/3p 2003-20082000 574,038 1,965,864 17 1/3p 2005-20102000 - 90,000 18 1/3p 2005-20102001 645,000 1,335,000 93 1/3p 2006-20112001 4,987,200 5,164,500 83 1/3p 2006-20112002 1,651,500 1,726,500 83 1/3p 2007-20122003 500,000 500,000 161 1/4p 2007-20132003 3,428,542 3,635,001 158 p 2007-20132004 6,601,041 6,901,328 128 ‚½p 2008-20142004 - 60,000 143 ‚½p 2008-20142005 1,917,292 1,985,000 145 p 2009-20152006 1,019,000 - 265 ‚¼p 2010-2016 21,369,903 23,484,483Details of the Group's Executive Share Option Schemes are set out in theDirectors' Remuneration Report. Share options are granted at an exercise priceequal to the average mid-market price of the shares on the three days prior tothe date of grant.

6,252,528 options (2005 : 2,177,154) were exercisable at 31 December 2006. 1,062,500 options were granted during the year, 2,337,946 options were exercised during the year and 839,134 options lapsed during the year. The weighted average share price during the period for options exercised over the year was ‚£2.45 (2005 : ‚£1.82).

22 Share capital (continued)

There are no performance criteria attached to the exercise of the options granted prior to 2003. Options granted to directors under the share option scheme adopted during 2002, and implemented in 2003, are subject to performance criteria as set out in the Directors' Remuneration Report. There are no performance criteria under this scheme for options granted to employees.

Long Term Retention Plan

The following options granted under the Group's LTRP were outstanding at 31 December:

Number of ordinary shares under Exercise priceYear of optionGrant 2006 2005 (per share) Exercise period 2003 1,688,056 1,793,489 3 1/3p 2007-20082004 100,000 120,000 3 1/3p 2008-20092005 138,003 138,003 3 1/3p 2009-20102006 1,299,733 - 3 1/3p 2010-2011 3,225,792

2,051,492

Options are granted under the Group's LTRP at par value (3 1/3 pence pershare). There are no performance criteria attached to the exercise of optionsunder the LTRP. However, no LTRP options are granted unless the Group achievesa minimum level of EPS growth of RPI plus 3%. The level of grant variesbetween RPI plus 3% and the maximum grant of RPI plus 10%. 1,313,354 LTRPoptions were granted during the year, 28,453 LTRP options were exercisedduring the year and 110,601 LTRP options lapsed during the year. Furtherdetails of the LTRP are provided in the Directors' Remuneration Report.

Long Term Incentive Scheme

The Group introduced a Long Term Incentive Scheme (`LTIS') in 2005. Under thisScheme, the executive directors (but not the Chairman) and other key seniorexecutives are awarded shares dependent upon the achievement of performancetargets established by the Remuneration Committee. The performance measuresfor the first cycle are operating profit, return on capital employed andgrowth in the company's share price. The share price performance measureapplies to the executive directors only. The awards are in the form ofrestricted shares and are deferred for two years from the award date. On theassumption that 2006 actual performance is repeated in 2007, 7,100,669 sharesare potentially issuable under the scheme. Further details of the LTIS areprovided in the Directors' Remuneration Report.John Wood Group PLC is a public limited company, incorporated and domiciled inScotland.23 Share premium 2006 2005 US$m US$m At 1 January 292.1 200.9

Arising on issue of new shares, net of expenses 0.4 89.3 Allocation of shares to employee share trusts 1.6 1.9

At 31 December 294.1 292.1

Expenses of share issue amounted to US$0.1m (2005 : $1.4m).

24 Retained earnings 2006 2005 US$m US$m

At 1 January - before adoption of IAS 32 and IAS 39 288.1 215.7 Adoption of IAS 32 and IAS 39 - (0.9) At 1 January 288.1 214.8

Profit for the year attributable to equity shareholders 120.5 80.5 Dividends paid

(20.8) (17.5)Credit relating to share based charges 9.7 7.9

Actuarial gain/(loss) on retirement benefit liabilities 8.5 (2.5) Movement in deferred tax relating to retirement benefit (2.6) 0.7 liabilities Shares allocated to ESOP trusts

(1.7) (2.3)Shares disposed of by ESOP trusts 1.4 1.7

Exchange differences in respect of shares held by ESOP trusts (5.7) 4.8

At 31 December 397.4 288.1

Retained earnings are stated after deducting the investment in own shares held by employee share trusts. Investment in own shares represents the cost of 21,059,981 (2005 : 22,031,380) of the company's ordinary shares totalling US$46.4m (2005 : US$40.4m). Options have been granted over 46,290 (2005 : 121,290) shares held by the ESOP trusts.

Shares acquired by the trusts are purchased in the open market using fundsprovided by John Wood Group PLC to meet obligations under the Employee ShareOption Schemes and the LTRP. During 2006, 1,020,000 shares at a value ofUS$1.7m were allocated to the trust in order to satisfy the exercise of shareoptions. 1,991,399 shares were issued during the year to satisfy the exerciseof share options at a value of US$1.4m. Exchange adjustments of US$5.7m aroseduring the year relating to the retranslation of the investment in own sharesfrom sterling to US dollars. The costs of funding and administering theschemes are charged to the income statement in the period to which theyrelate. The market value of the shares at 31 December 2006 was US$108.0m (2005: US$77.2m) based on the closing share price of ‚£2.62 (2005 : ‚£2.04). The ESOPtrusts have waived their rights to receipt of dividends.25 Other reserves Capital Currency reduction translation Hedging Total reserve reserve reserve US$m US$m US$m US$m At 1 January 2005 - before adoption of 88.1 1.7 - 89.8IAS 32 and IAS 39 Adoption of IAS 32 and IAS 39 - - (2.4) (2.4)At 1 January 2005 88.1 1.7 (2.4) 87.4Exchange differences on retranslation offoreign currency net assets - (15.5) - (15.5)Fair value gains - - 3.8 3.8 At 31 December 2005 88.1 (13.8) 1.4 75.7 Exchange differences on retranslation offoreign currency net assets - 5.6 -

5.6

Tax on foreign exchange losses offset in - 3.2 - 3.2reservesFair value gains - - 0.8 0.8 At 31 December 2006 88.1 (5.0) 2.2 85.3

A capital redemption reserve was created on the conversion of convertible redeemable preference shares immediately prior to the IPO in June 2002. The capital redemption reserve was converted to a capital reduction reserve in December 2002 and is part of distributable reserves.

The currency translation reserve relates to the retranslation of foreign currency net assets on consolidation. This was reset to zero on transition to IFRS at 1 January 2004.

The hedging reserve relates to the accounting for derivative financial instruments under IAS 39. Fair value gains and losses in respect of effective cash flow hedges are recognised in the hedging reserve.

26 Minority interest 2006 2005 US$m US$m At 1 January 19.6 12.0Acquisition of minority interest (11.1) -Share of profit for the year 0.7 3.1Dividends paid (1.5)

(1.3)

Minority interest recognised on conversion of joint venture to - 5.8 subsidiary

At 31 December 7.7 19.6

27 Cash generated from operations

2006 2005 US$m US$mReconciliation of operating profit to cash generatedfrom operations: Operating profit 207.5 148.0 Adjustments for:Depreciation 51.4 44.8(Gain)/loss on disposal of property plant and (1.4) 0.5

equipment

Amortisation of other intangible assets 7.6 4.8Share based charges 9.7 7.9

Impairment and restructuring charges - non-cash impact - 5.3 Profit on disposal of subsidiaries

- (9.7)Increase/(decrease) in provisions 8.1 (0.2) Changes in working capital (excluding effect ofacquisition and disposal of subsidiaries)Increase in inventories (55.2) (44.1)Increase in receivables (125.6) (35.5)Increase in payables 127.2 46.1 Exchange differences (4.2) (6.6)

Cash generated from operations 225.1 161.3

Analysis of net debt At 1 January Exchange At 31 movements December 2006 Cash flow 2006 US$m US$m US$m US$m Cash and cash equivalents 149.9 (15.8) 6.2 140.3Short term borrowings (47.9) 12.3 (5.9) (41.5)Long term borrowings (347.8) 5.2 (14.1) (356.7) Net debt (245.8) 1.7 (13.8) (257.9)28 Acquisitions

The assets and liabilities acquired in respect of Book value and

acquisitions during the year were as follows:

fair value US$m Property plant and equipment 3.2Other intangible assets 8.2Inventories 0.9Trade and other receivables 25.4Bank overdraft (8.4)Trade and other payables (17.6)Minority interest (1.6) Net assets acquired 10.1 Goodwill 25.4 Consideration 35.5 Consideration satisfied by:Cash 17.6Deferred consideration 17.9 35.5The Group has used acquisition accounting for all purchases and, in accordancewith the Group's accounting policies, the goodwill arising on consolidation ofUS$25.4m has been capitalised. Acquisitions during the year include thepurchase of 100% of Global Performance Holdings Inc in March and the purchaseof 55% of Somias in May.The acquisitions carried out during the year provide the Group with access tonew markets and strengthen the Group's capabilities in certain areas. Theacquired companies will be in a position to access the Group's wider clientbase and use the Group's existing relationships to further grow and developtheir businesses. These factors contribute to the goodwill recognised by theGroup on the acquisitions during the year.

Deferred consideration payments of US$4.2m were made during the year in respect of acquisitions made in prior periods. Payments during the year and changes to previous estimates of deferred consideration have resulted in additional goodwill of US$5.5m. US$20.2m was paid to acquire minority interests, including the minority shareholdings of Mustang Engineering Holdings Inc, resulting in additional goodwill of US$7.5m.

The outflow of cash and cash equivalents on the acquisitions made during theyear is analysed as follows: US$m Cash consideration 17.6Bank overdraft acquired 8.4 26.0

The results of the Group, as if the above acquisitions had been made at the beginning of period, would have been as follows:

US$m Revenues 3,483.5Profit for the year 121.7

The acquired businesses earned cumulative revenues of US$14.7m from the beginning of the year to their respective acquisition dates. From the dates of acquisition to 31 December 2006, the acquisitions contributed US$59.2m to revenues and US$2.4m to profit for the year.

29 Employees and directorsEmployee benefits expense 2006 2005 US$m US$m Wages and salaries 1,155.8 869.0Social security costs 89.4 73.2

Pension costs - defined benefit schemes (note 30) 7.1 7.0 Pension costs - defined contribution schemes (note 30) 23.7 17.1

1,276.0 966.3Average monthly number of employees (including executive 2006 2005directors) No. No.By geographical area:Europe 4,544 3,952North America 9,115 7,576Rest of the World 5,855 5,059 19,514 16,587Key management compensation 2006 2005 US$m US$m Salaries and short-term employee benefits 15.7 13.7Amounts receivable under long-term incentive schemes 8.8 4.5Post employment benefits 0.9 0.9Share based charges 6.0 5.4 31.4 24.5

The key management figures given above include executive directors.

2006 2005Directors US$m US$m Aggregate emoluments 5.6 4.4

Aggregate gains made on the exercise of share options 1.4 2.1 Aggregate amounts receivable under long-term incentive 1.5 1.2 schemes Company contributions to defined contribution pension 0.1 0.1 schemes

8.6 7.8

One director (2005: one) has retirement benefits accruing under a defined contribution pension scheme. Retirement benefits are accruing to six (2005: five) directors under the company's defined benefit pension scheme. Further details of directors emoluments are provided in the Directors' Remuneration Report.

30 Retirement benefit liabilities

One of the Group's pension schemes in the UK, the John Wood Group PLCRetirement Benefits Scheme, is a defined benefit scheme, which is contractedout of the State Scheme and provides benefits based on final pensionablesalary. The assets of the scheme are held separately from those of the Group,being invested with independent investment companies in trustee administeredfunds.The most recent actuarial valuation of the scheme was carried out at 5 April2004 by a professionally qualified actuary. On 5 April 2007 there will be achange to the benefits provided under the scheme. From that date benefits willbe based on Career Averaged Revalued Earnings ("CARE").The principal assumptions made by the actuaries at the balance sheet datewere: 2006 2005 % % Rate of increase in pensionable salaries 5.20 4.75

Rate of increase in pensions in payment and deferred 2.75 2.75 pensions Discount rate

5.20 4.80Expected return on scheme assets 7.03 7.09

The expected return on scheme assets is based on market expectation at the beginning of the period for returns over the entire life of the benefit obligation.

The mortality assumptions used by the actuary take account of standard actuarial tables compiled from UK wide statistics relating to occupational pension schemes. These assumptions are regularly reviewed for their appropriateness.

The exchange rates used to retranslate the pension disclosures into US$ are asfollows: 2006 2005 Average rate ‚£1 = US$ 1.8427 1.8170Closing rate ‚£1 = US$ 1.9572 1.7168

The amounts recognised in the balance sheet are determined as follows:

2006 2005 US$m US$m Present value of funded obligations (165.3) (137.0)Fair value of scheme assets 140.4 103.7 Net liabilities (24.9) (33.3)The major categories of scheme assets as a percentage of total scheme assetsare as follows: 2006 2005 % % Equity securities 81.3 84.7Corporate bonds 3.2 7.5Gilts 9.7 7.7Cash 5.8 0.1

The amounts recognised in the income statement are as follows:

2006 2005 US$m US$m

Current service cost included within employee benefits 7.1 7.0 expense

Interest cost 7.3 6.3Expected return on scheme assets (8.1) (6.2)

Total included within net finance (income)/expense (0.8) 0.1

The employee benefits expense is included within administrative expenses.

Changes in the present value of the defined benefit liability are as follows: 2006 2005 US$m US$m

Present value of obligation at 1 January 137.0 122.2 Current cost

7.1 7.0Interest cost 7.3 6.3Actuarial (gains)/losses (5.6) 14.8Scheme participants contributions 3.5 3.2Benefits paid (3.7) (2.1)Exchange differences 19.7 (14.4)

Present value of obligation at 31 December 165.3 137.0 Changes in the fair value of scheme assets are as follows:

2006 2005 US$m US$m

Fair value of scheme assets at 1 January 103.7 88.3 Expected return on scheme assets

8.1 6.2Contributions 13.6 9.7Benefits paid (3.7) (2.1)Actuarial gains 2.9 12.3Exchange differences 15.8 (10.7)

Fair value of scheme assets at 31 December 140.4 103.7

Analysis of the movement in the balance sheet liability:

2006 2005 US$m US$m At 1 January 33.3 33.9Current service cost 7.1 7.0Finance (income)/expense (0.8) 0.1Contributions (10.1) (6.5)

Net actuarial (gains)/losses recognised in the year (8.5) 2.5 Exchange differences

3.9 (3.7) At 31 December 24.9 33.3

Contributions include a one-off payment of US$3.7m (‚£2.0m) made by the company in December 2006 as part of the CARE transition arrangements.

Cumulative actuarial (gains) and losses recognised in equity:

2006 2005 US$m US$m 33.0At 1 January 35.5

Net actuarial (gains)/losses recognised in the year (8.5) 2.5

At 31 December 27.0 35.5

The actual return on scheme assets was US$11.0m (2005 : US$18.5m).

History of experience gains and losses:

2006 2005 2004 2003 2002 Difference between the expected andactual return on scheme assets :Gain/(loss) (US$m) 2.9 12.3 4.9 6.3 (11.6)Percentage of scheme assets 2% 12% 6% 10% 26% Experience gains/(losses) on schemeliabilities:Gain/(loss) (US$m) 5.6 (14.8) (9.7) (7.5) (2.4)

Percentage of the present value of the 3% 11% 8% 8% 4% scheme liabilities

Present value of scheme liabilities 165.3 137.0 122.2 93.0 67.1 (US$m) Fair value of scheme assets (US$m) 140.4 103.7 88.3 65.5 43.8 Deficit (US$m)

24.9 33.3 33.9 27.5 23.3

The contribution expected to be paid during the financial year ending 31 December 2007 amounts to US$5.9m (‚£3.0m). In addition, as part of the transition of the scheme to a CARE basis, the Group will make an additional contribution of US$3.9m (‚£2.0m) in April 2007.

Pension costs for defined contribution schemes are as follows:

2006 2005 US$m US$m Defined contribution schemes 23.7 17.1

31 Operating lease commitments - minimum lease payments

2006 2005 Vehicles, Vehicles, plant and plant and equipment equipment Property Property US$m US$m US$m US$m Commitments under non-cancellableoperating leases expiring: Within one year 6.7 2.4 5.5 1.4Later than one year and less than five 19.3 8.7 23.5 8.9yearsAfter five years 18.5 0.6 11.0 0.4 44.5 11.7 40.0 10.7

The Group leases various offices and warehouses under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The Group also leases plant and machinery under non-cancellable operating lease agreements.

32 Contingent liabilities

At the balance sheet date the Group had cross guarantees without limitextended to its principal bankers in respect of sums advanced to subsidiaries.At 31 December 2006, the Group has outstanding guarantees of US$9.1m (2005 :US$14.0m) in respect of joint venture banking arrangements.

33 Capital and other financial commitments

2006 2005 US$m US$m Contracts placed for future capital expenditure not 3.4 4.4provided in the financial statementsThe capital expenditure above relates to property plant and equipment. Thereare no significant joint venture capital commitments included in the figuresabove.

There are financial commitments relating to the purchase of shares from certain subsidiary minority shareholders based on the profits of these subsidiaries and the payments extend over a number of years.

34 Related party transactions

The following transactions were carried out with the Group's joint ventures.These transactions comprise sales and purchases of goods and services in theordinary course of business. 2006 2005 US$m US$m

Sale of goods and services to joint ventures 120.7 95.2 Purchase of goods and services from joint ventures 6.8 6.7 Receivables from joint ventures

20.9 12.7Payables to joint ventures 3.2 5.8In addition to the above, the Group charged JW Holdings Limited, a company inwhich Sir Ian Wood holds a controlling interest, an amount of US$0.1m (2005 :US$0.1m) for management services provided under normal commercial terms.

Key management compensation is disclosed in note 29.

35 Principal subsidiaries and joint ventures

The Group's principal subsidiaries and joint ventures are listed below.

Country of incorporation Ownership orName of subsidiary or joint registration interest % Principal activityventure Engineering & ProductionFacilities: Wood Group Engineering (North UK 100 Engineering design,Sea) Limited operations maintenance and managementSIGMA 3 (North Sea) Limited UK 33.3* Engineering design, operations maintenance and managementMustang Engineering Holdings USA 100 Engineering designInc.

Alliance Wood Group Engineering USA 100 Engineering design

L.P.J P Kenny Engineering Limited UK 100 Engineering designSIMCO Consortium Venezuela 49.5* Operations maintenance and managementWood Group Production Services, USA 100 Operations maintenanceInc. and managementWood Group Colombia S.A. Colombia 100 Operations maintenance and managementDeepwater Specialists Inc USA 100 Commissioning servicesWood Group Equatorial Guinea Cyprus 100 Operations maintenanceLimited and managementGlobal Performance Holdings, USA 100 Engineering, projectInc and construction management Well Support: Wood Group ESP, Inc. USA 100 Electric submersible pumps

Corporacion ESP de Venezuela CA Venezuela 100 Electric submersible

pumpsWood Group Products & Services Argentina 100 Electric submersibleSA pumpsWood Group Pressure Control, USA 100 Valves and wellheadL.P. equipmentWood Group Pressure Control UK 100 Valves and wellheadLimited equipmentWood Group Logging Services USA 100 Logging servicesInc. Gas Turbine Services: Wood Group Light Industrial UK 100 Gas turbine repair andTurbines Limited overhaulWood Group Engineering Services Jersey 100 Gas turbine repair and overhaul(Middle East) LimitedRolls Wood Group (Repair & UK 50* Gas turbine repair andOverhauls) overhaul LimitedTransCanada Turbines Limited Canada 50* Gas turbine repair and overhaulWood Group Advanced Parts Switzerland 100 Provision of gasManufacture AG turbine parts

Wood Group Gas Turbine Services UK 100 Gas turbine repair

and

Limited overhaulWood Group Field Services, Inc. USA 100 Gas turbine repair

and overhaulWood Group Power Solutions, USA 100 Provision of gasInc. turbine packagesWood Group Pratt & Whitney USA 49* Gas turbine repair andIndustrial Turbine Services, overhaulLLCWood Group Power Operations, USA 100 Power plant operationsInc and maintenance

The proportion of voting power held equates to the ownership interest, other than for joint ventures (marked *) which are jointly controlled.

Shareholder information

Payment of dividends

The Company declares its dividends in US dollars. As a result of theshareholders being mainly UK based, dividends will be paid in sterling, but ifyou would like to receive your dividend in US dollars please contact theRegistrars at the address below. All shareholders will receive dividends insterling unless requested. If you are a UK based shareholder, the Companyencourages you to have your dividends paid through the BACS (Banker'sAutomated Clearing Services) system. The benefit of the BACS payment method isthat the Registrars post the tax vouchers directly to the shareholders, whilstthe dividend is credited on the payment date to the shareholder's Bank orBuilding Society account. UK shareholders who have not yet arranged for theirdividends to be paid direct to their Bank or Building Society account and wishto benefit from this service should contact the Registrars at the addressbelow. Sterling dividends will be translated at the closing mid-point spotrate on 4 May 2007 as published in the Financial Times on 5 May 2007.

Officers and advisers

Secretary and Registered Office

I JohnsonJohn Wood Group PLCJohn Wood HouseGreenwell RoadABERDEENAB12 3AXTel: 01224 851000Registrars

Lloyds TSB Registrars Scotland

PO Box 28448Finance HouseOrchard BraeEDINBURGHEH4 1WQTel: 0870 601 5366StockbrokersJPMorgan Cazenove LimitedCredit SuisseAuditorsPricewaterhouseCoopersChartered Accountants LLPFinancial calendarResults announced 6 March 2007Ex-dividend date 2 May 2007Dividend record date 4 May 2007Annual General Meeting 17 May 2007Dividend payment date 24 May 2007The Group's Investor Relations website can be accessed at www.woodgroup.com.

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WOOD GROUP (JOHN) PLC

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Related Shares:

Wood Group (J)