Final Results

4th Mar 2008 07:00

Final results for the year to 31 December 2007

Continuing strong growth and record earningsJohn Wood Group PLC ("Wood Group", the "Group") is a market leader inengineering design, production support and industrial gas turbine services forcustomers in the oil & gas and power generation industries around the world.Operating in 46 countries, Wood Group's businesses employ over 24,000 people[1].Financial HighlightsRevenue of $4,432.7m (2006: $3,468.8) up 28%EBITA[2] of $318.4m (2006: $215.1m) up 48%Profit before tax of $259.9m (2006: $183.6m) up 42%Basic earnings per ordinary share of 33.0 cents (2006: 24.4 cents) up 35%Adjusted diluted earnings per ordinary share[3] of 36.9 cents (2006: 24.5cents) up 51%

Proposed full year dividend of 7.0 cents (2006: 5.0 cents) up 40%, reflecting the strength of the group's performance and confidence in future prospects

Operating HighlightsStrong EBITA growth across all three divisionsEngineering & Production Facilities - up 51%Well Support - up 18%Gas Turbine Services - up 69%

Continued margin improvement in all three divisions with group EBITA margin of 7.2% (2006: 6.2%); potential for further improvement

Completed the acquisition of IMV Projects Inc. ("IMV"), a market leader for in situ heavy oil developments in Canada

Oil & gas and power markets expected to remain strong

Continuing to invest for future growth

Engineering & Production Facilities - strong revenue and EBITA growth; margin improvement in both Engineering and in Production Facilities

Engineering

- increased activity across all business areas;- wide range of upstream projects with strong demand for subsea engineering;- high activity in North America pipelines and downstream;- IMV acquisition provides strong synergies and growth potential;- targeting further development in Middle East and Asia Pacific;Production Facilities- renewed long term contracts in the UK;- developing position to support newer North Sea entrants;- achieving good progress in international markets, especially Algeria, Equatorial Guinea and Trinidad;

Well Support - good revenue growth, driven by robust drilling activity and growing demand for artificial lift; investing to deliver further margin improvement

- Electric submersible pumps ("ESPs") - developed our market position in Russiaand extended scope in Chad- Pressure control - developed US market position, international developmentprogressing well. Ongoing investment in manufacturing capacity in China,Mexico, Saudi Arabia and the US- Logging services - continuing to perform well and increased capacity in the USGas Turbine Services - strong revenue and EBITA growth- Oil & gas - expanding range of turbines serviced; increasing business underlong term contract- Power & industrial - increasing long term maintenance and power stationoperations & maintenance agreements. Fast track power package solutions seeinghigh activity, with good opportunities over next two to three years

Focus on higher margin areas and our ongoing cost reduction and efficiency initiatives, including the component repair rationalisation, will provide further margin improvement

Sir Ian Wood, Chairman, Wood Group, said:

"The market for energy services is expected to remain strong. Our expanding range of differentiated services and products, and great team of people throughout the world position us well for continuing strong growth."

ENQUIRIES:

Wood GroupAllister Langlands, Chief Executive, 01224 851000Alan Semple, Finance DirectorNick Gilman / Carolyn Smith

Brunswick, Patrick Handley / Camilla Gore, 020 7404 5959 Notes

1 Number of employees and contractors at 31 December 2007.

2 EBITA represents operating profit of $285.2m (2006: $207.5m) for 2007 beforeadjusting for profit on disposal of interest in joint venture of $3.6m (2006:nil), impairment and restructuring charges of $26.2m (2006: nil), andamortisation of $10.6m (2006: $7.6m). This financial term is provided as it isa key unit of measurement used by the Group in the management of its business.3 Shares held by the group's employee share ownership trusts are excluded fromthe 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. Adjusteddiluted earnings per ordinary share is calculated on earnings beforeamortisation, impairment and restructuring charges and profit on disposal ofinterest in joint venture, net of tax.Chairman's statementIntroduction2007 saw continuing strong growth across our three divisions and recordearnings. Revenue grew 28% to $4,432.7m, EBITA grew 48% to $318.4m, basic EPSgrew 35% to 33.0c and adjusted diluted EPS grew 51% to 36.9c. Reflecting thestrength of our performance and confidence in future prospects, we areproposing a final dividend of 5.0 cents, taking the total dividend for 2007 to7.0 cents, up 40% on last year.2007 performance 2007 ($m) 2006 ($m) change Revenue 4,432.7 3,468.8 +28% EBITA 318.4 215.1 +48% EBITA margin 7.2% 6.2% Profit before tax 259.9 183.6 +42% Basic EPS 33.0c 24.4c +35% Adjusted diluted 36.9c 24.5c +51% EPS Total dividend 7.0c 5.0c +40% ROCE 28.3% 21.5% MarketsWe expect continuing growth in demand for energy, primarily driven by theworld's developing economies. Oil & gas operators remain focused on developingtheir reserves - through new discoveries, often in deep water and harshenvironments; through developing unconventional reserves, including heavy oiland shale sources; through achieving better routes to market for previouslystranded reserves, which is contributing to the growth in the Liquefied NaturalGas ("LNG") market; and through maximising recovery from existing fields.Deepwater developments, subsea completions and pipelines, and productionenhancements are all significant growth areas in which Wood Group has strongmarket positions.The growing global economy is also leading to increasing investment inelectricity generation around the world. This is greatest in the developingeconomies, where the pace of economic development can also lead to seriouspower shortages and the need for fast track power solutions, a sector in whichWood Group is well placed. The relative environmental benefits of gas amongtraditional energy sources and shorter development lead times is expected tolead to an increasing share for gas in world electricity generation and growthin the gas turbine population.In the current global market we believe that oil prices will stay above $65,which is stronger than our prediction last year. There should also becontinuing strong demand for gas, the most environmentally friendly fossilfuel, the price of which will become more global and increasingly influenced bythe oil price. Accordingly, we expect continuing robust exploration &production ("E&P") spending programmes and are continuing our investmentprogramme both organically and through acquisitions.The fastest growth in our business over the next few years is likely to be seenin the eastern hemisphere. We have made further investments to develop ourmarket position and capability in the region, and are focusing on developingour relationships with national oil companies ("NOCs").Future growth will not be achieved without risks and challenges. The global oil& gas industry needs to develop reserves in harsher locations, and geopoliticaluncertainty in some of the world's key oil & gas provinces is a fact of life.We are focused on, and good at, tackling these challenges. We assess risk andreward and build in mitigating factors to, wherever possible, ensure we cankeep our people safe, service our customers and, at the same time, achieveacceptable returns.

Strategy

Our strategy is to achieve sustainable growth, add value to our clients' operations and focus new developments on areas where we can develop our market leading positions. It has four strands

- to maintain a good balance between field developments and later cycle production support- to grow and maintain market leading positions based on differentiated know-how- to develop long term client relationships, including performance contracts- to extend our services and broaden our international presence

People

Our key focus is to be an employer of choice for quality people and to providethem with a work environment in which no one will be hurt. This is addressedfurther in the Chief Executive's operational review.

I would like on behalf of the Board, to personally thank all of our people around the world whose skills, commitment and enthusiasm, and excitement in our future is driving our growth.

Board changesTrevor Noble and Wendell Brooks both retired from the Board during the yearwith our grateful thanks and best wishes. Mike Straughen and Jim Renfroe joinedthe Board as Group Directors on 1 May 2007 and 26 February 2008 respectively,and David Woodward joined as a non-executive Director on 23 May 2007. The newboard members bring with them a broad range of international industryexperience and we are delighted that they have joined us.

Outlook

The market for energy services is expected to remain strong. Our expanding range of differentiated services and products and great team of people throughout the world position us well for continuing strong growth.

Chief Executive's operational review

2007 ($m) 2006 ($m) change Revenue 4,432.7 3,468.8 +28% Engineering & 2,582.8 1,972.7 +31% Production Facilities Well Support 862.1 739.1 +17% Gas Turbine 955.7 713.7 +34% Services EBITA 318.4 215.1 +48% Engineering & 214.5 141.9 +51% Production Facilities Well Support 87.1 73.6 +18% Gas Turbine 64.3 38.0 +69% Services EBITA margin 7.2% 6.2% Engineering & 8.3% 7.2% Production Facilities Well Support 10.1% 10.0% Gas Turbine 6.7% 5.3% Services Operating and financial highlightsDuring 2007 we delivered strong revenue growth across all three divisions, up28% at $4,432.7m, with the greatest growth coming from engineering activitiesand from Gas Turbine Services. The strong performance in Engineering &Production Facilities was driven by increased activity across all businessareas within Engineering, and, in Production Facilities, by increasingexpenditure on integrity and production enhancement both in the North Sea andin some of our newer markets. Robust drilling activity and growing demand forartificial lift using ESPs led to higher demand for our Well Support services.The strong requirement for gas turbine maintenance, repair and overhaul in theoil & gas industry, and the strengthening power markets worldwide, includinggrowing demand for fast track power package contracts, led to the increase inGas Turbine Services revenue.Group EBITA increased by 48% to $318.4m, with good performance in alldivisions. The EBITA increase reflects the 28% increase in revenue and theimprovement in EBITA margins in all three divisions, leading to a 1% pointincrease in Group margins from 6.2% to 7.2%. The Engineering & ProductionFacilities EBITA margin increased from 7.2% to 8.3%, due primarily to increasesin the underlying margins for both our engineering and production facilitiesactivities. The slight improvement in the Well Support EBITA margin from 10.0%to 10.1% was driven by the positive margin impact of increasing revenue inareas of activity where we have operational gearing, and the benefit of newhigher margin services and products. The improvement was offset by the cost ofadditions to our manufacturing and service capacity and some pricing pressurein certain of our US activities. Going forward, we are confident that ourinvestment in lower cost manufacturing and service capacity will help us todeliver further efficiency improvements. The increase in our Gas TurbineServices margin from 5.3% to 6.7% included the impact of our continuing focuson higher margin areas, our success in increasing our business under long termcontracts and our ongoing cost reduction and efficiency initiatives.

People

We strive to be the employer of choice and to attract, develop and retain thebest talent available. This will continue to help us to be well positioned toprovide world class services and products to our customers and growth for ourshareholders. Securing interesting and challenging projects helps us to attractthe best people which, in turn, enables us to continue to be a leader in theprovision of services and products. In the year we increased our overallheadcount by 18% to over 24,000 people. We had a whole range of successfulpeople initiatives during the year. These included using our internationallymobile workforce to support new market opportunities, for example our highlyskilled South American managers are now involved in projects around the world,including Algeria, Dubai, Malaysia and Trinidad. We also run stewardshipprogrammes that help develop our people's expertise and long term careers withthe Group. We have increased our investment in graduate recruitment programmes,apprentice schools and in developing enhanced online training packages.

Safety

We are committed to achieving the highest standards of safety for our people.We have won recognition for our safety performance in many of our companiesaround the world and delivered continued improvement in the year. The Groupprovides support through conferences, regional forums and inter- company auditsto encourage the spread of good practice. Improvement in safety performance isa key measure of our success and will continue to be given the highestpriority. We will not be satisfied until no one is hurt and we are striving toachieve that goal.Areas of focus for 2008Key areas of focus for us in 2008 will be to extend our Engineering presence inthe eastern hemisphere, particularly in the Middle East and Asia Pacific; tobuild on our more recently established Production Facilities markets; tocomplete the current phase of our increased manufacturing capacity in WellSupport and to continue to extend our Gas Turbine Services business into highermargin areas.Engineering & Production FacilitiesWe offer a wide range of engineering services to the upstream, midstream,downstream and industrial sectors. These include conceptual studies,engineering, project and construction management, control systems upgrades andenhancement. We offer life of field support to producing assets, throughbrownfield engineering and modifications, production enhancement, operationsmanagement, maintenance management and abandonment services.Summary financial performance 2007 ($m) 2006 ($m) change Revenue 2,582.8 1,972.7 +31% EBITA 214.5 141.9 +51% EBITA margin 8.3% 7.2% Operating and financial and highlightsThe growth in Engineering & Production Facilities was driven by strong demandfor our services across the division. The revenue split between engineering andproduction facilities activities continues to be approximately 45% to 55%.Production Facilities was active in the North Sea, renewing major contracts andgaining a number of duty holder roles. We made good progress internationally,particularly in the markets where we have recently established significantbusinesses, including Algeria, Equatorial Guinea and Trinidad. EBITA marginincreased from 7.2% to 8.3% due primarily to increases in the underlyingmargins for both our engineering and production facilities activities.

Engineering - services and sectors

We have market leading positions in:

Sector Services Areas of expertise Upstream Engineering, project and Deepwater and construction management, lightweight topsides, refinery upgrades and onshore processing operational enhancement. facilities Subsea engineering and Subsea engineering, pipelines offshore and onshore pipelines, gas storage Downstream, process and Refineries, industrial petrochemical plants, process and industrial facilities Upstream activities represent around 40% of Engineering revenues. In upstreamwe have a market leading position from concept studies through to detailedengineering for deepwater topsides and onshore processing facilities,principally serving customers from our Houston, Perth and London hubs. We havebeen working on a wide range of deepwater upstream projects in the Gulf ofMexico, including Cascade, Mirage and Perdido. We have also been working onoffshore developments in Australia, China and West Africa; and onshore inCanada, India and the US. In situ heavy oil developments in Canada represent asignificant long term growth market and we have secured a market leadingcapability in engineering procurement and construction management ("EPCM")through the acquisition of IMV Projects Inc. ("IMV"). IMV has performed wellsince acquisition, continuing to work on a range of projects in the FosterCreek area and winning new work, such as the award of a construction managementproject for StatoilHydro.Subsea engineering, pipelines and midstream activities represent around 30% ofEngineering revenue. We have built on our leading subsea engineering position,entering into an alliance with BP to become a preferred global provider. Wehave been active in all major offshore provinces, including West Africa and theNorth West Shelf in Australia. Our onshore pipeline engineering activities inthe US delivered a strong performance, driven by the need to transport gas fromunconventional gas developments to areas of demand. We anticipate that therewill be increased investment in midstream, driven by the desire to find newroutes to monetise gas. We are continuing with our project to install our firstLNG Smart ‚® Air Vaporization Process at the LNG receiving terminal in LakeCharles, Louisiana.Downstream, process and industrial activities represent around 30% ofEngineering revenue. We have seen high demand for our downstream engineeringservices and have been active on a wide range of refinery upgrade,de-bottlenecking, heavy oil and low sulphur diesel modification projects. Wehave been busy on broad range of automation projects, including a majorrefinery and chemical plant project in Singapore.

Production Facilities - services and sectors

We offer a broad range of life of field production facilities support services to our clients around the world. Our range of services across development, production, enhanced recovery and decommissioning include

- brownfield engineering and modifications- operations and maintenance- human resources management- consulting and technical services- supply chain managementOur activities in the North Sea, where we are the largest maintenance,modifications and operations contractor for a broad range of clients, representaround 65% of Production Facilities revenue, a similar position to 2006. We sawgood growth in the North Sea, driven by a number of subsea tiebacks and ourcustomers' ongoing focus on integrity enhancements. We were also active withour customers on a number of initiatives to reduce the overall cost ofproduction. We successfully renewed and extended long term contracts in the UKwith Amerada Hess, BP, Shell, Talisman and Total. Over the last three years wehave invested in additional capability and relationships in order to provideservices to new entrants, and we have been awarded the duty holder role for theHummingbird vessel on the Chestnut field.We have continued to expand our international activities which now representaround 35% of Production Facilities revenue. In 2007, we focused on developingfurther our market positions where we have established a presence over recentyears. For example, we have seen growth in our maintenance outsourcing contractfor BP in Trinidad and our engineering and construction support contracts forthe Sonatrach, BP and Statoil operated In Amenas and In Salah projects inAlgeria. We have also continued to develop our commissioning and pre-operationssupport services, including an important project supporting the commissioningof Shell's Perdido development in the Gulf of Mexico. We completed theacquisition of Producers Assistance Corporation ("PAC") in January 2008 inorder to extend our activities in the US onshore market.Engineering & Production Facilities outlookIn Engineering, a major focus going forward will be to grow our activities inthe eastern hemisphere, particularly the Middle East and Asia Pacific, whichwill allow us to support local client needs and also to access skilledresources to augment our main hubs. In other parts of the world, we will lookto continue to build up our project and construction management expertise andadd further to our arctic engineering capabilities. In Production Facilities wecontinue to develop our commissioning and pre-operations support services,which should help drive improvements in margin and also provide pull throughopportunities for our core maintenance, modification and operations activities.Geographically, we will look to build on our established markets, as well asmake selected moves into new areas.

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

Summary financial performance 2007 ($m) 2006 ($m) change Revenue 862.1 739.1 +17% EBITA 87.1 73.6 +18% EBITA margin 10.1% 10.0% Operating and financial highlightsWe achieved good revenue growth across all of the businesses, driven by robustdrilling activity and growing demand for artificial lift using ESPs. We havecontinued to expand our business outside the US, which represents around halfof the division's revenue. The slight improvement in the EBITA margin to 10.1%from 10.0% was driven by the positive margin impact of increasing revenue inareas of activity where we have operational gearing, and the benefit of newhigher margin services and products. The improvement was offset by the cost ofadditions to our manufacturing and service capacity and some pricing pressurein certain of our US activities. Going forward, we are confident that ourinvestment in lower cost manufacturing capacity will help us to deliver furtherefficiency improvements. Electric submersible pumpsOur ESP activities represent around 45% of Well Support revenue. We are amarket leader in the sale, operation and service of ESPs used for productionenhancement through artificial lift. Maturing oilfields require increased useof artificial lift - services to bring hydrocarbons to the surface - and thereliability and efficiency of ESPs should increase their share of theartificial lift market. We are achieving good growth in both the US and otherinternational markets and we have been active for a wide range of clientsincluding BP-TNK, ConocoPhillips, ExxonMobil, Pan American, Pearl Oil andPetroleum Development Oman. We are focused on building our technology andknow-how and are involved in developments in the offshore market, and in steamassisted gravity drainage ("SAG-D") pumps primarily for the Canadian heavy oilmarket. We are also making good progress in the surface pumping applicationmarket where our equipment is used for a variety of fluid handlingapplications. Internationally, we have seen high levels of activity under ourlong term contracts in Chad, and in Russia where we have won a long term payfor performance contract supporting western manufactured pumps.Pressure ControlOur Pressure Control activities represent around 40% of Well Support revenue.We provide surface valve and wellhead equipment that is used upstream tocontrol pressures for oil and gas developments. In the US market, we saw robustlevels of drilling during the year, however additional drilling capacity cominginto the market, in conjunction with some reduction in rig rates, contributedto a more difficult pricing environment. We have focused on extending ourbranch network to maintain our high service levels and position ourselves tomaintain our strong market share as US drilling moves into the newerunconventional gas regions. Our ongoing internationalisation is progressingwell. We have set up a joint venture company in Saudi Arabia and areestablishing a local manufacturing facility to support our five year contractwith Saudi Aramco. Elsewhere in the Middle East and Africa, we won newcontracts in Algeria, Egypt, Kuwait and Yemen. In Mexico, where we opened a newmanufacturing plant in Monterrey, we won significant orders with PEMEX. InAustralia, we increased our activity on our contract with Santos and in the UKwe had a number of successes in both product sales and field serviceoperations. We are continuing to invest in lower cost manufacturing capacity inChina, while retooling in our US plant to ensure that we can continue tomaintain and profitably grow our market share in the US and internationally.Logging ServicesOur Logging Services activities represent around 15% of Well Support revenue.Our production focused slickline operations and our development focused casedhole electric wireline services in the US both performed well. In order to meetthe demand from this market, we have continued to increase our capacity andopened up bases in the Rockies and Barnett Shale. We have also extended ouroperations in pipe recovery to the offshore market. Our activities in Argentinaperformed well and continue to hold a significant market position.Well Support outlookFor Well Support we will continue to extend our international activities. InESP, we anticipate that we will deliver ongoing margin improvement in 2008, aswe achieve critical mass in a number of our international locations, introducenew higher margin product lines and continue to improve the efficiency of ouroperations. In Pressure Control, our investments in lower cost manufacturingcapacity will help us to improve margins over the longer term, maintain ourstrong market share in the US and penetrate new international markets. InLogging Services, we anticipate that our investment in new bases in the US andour differentiated services in the onshore and offshore markets will delivergood growth.Gas Turbine ServicesWe are the world leading independent provider of integrated maintenancesolutions and repair and overhaul services for industrial gas turbines andrelated accessories used for power generation, compression and transmission inthe oil & gas and power generation industries.Summary financial performance 2007 ($m) 2006 ($m) change Revenue 955.7 713.7 +34% ¢â‚¬¢ EBITA 64.3 38.0 +69% EBITA margin 6.7% 5.3% Operating and financial highlightsThe strong demand for gas turbine maintenance, repair and overhaul in the oil &gas industry, and the strengthening power markets worldwide, including growingdemand for fast track power packages, led to the increase in Gas TurbineServices revenue. The increase in our Gas Turbine Services margin from 5.3% to6.7% includes the impact of our continuing focus on higher margin areas, oursuccess in increasing our business under long term contracts and our ongoingcost reduction and efficiency initiatives. We continue to reduce our emphasison certain lower margin activities and at the end of 2007, we took thedifficult, but necessary decision to close our component repair operations inDundee. We have sought to minimise redundancies and have offered alternativepositions within the Group where possible. Oil & gasOur oil & gas activities provide support for turbines that are used for powergeneration, gas compression and oil and gas transmission and represent aroundone third of Gas Turbine Services revenue. The breadth of our offering and thelink to our Production Facilities capability are key areas of differentiation.We are investing to maintain and enhance our market positioning and in theperiod increased the range of turbines for which we provide aftermarketservices, including entering the Solar Centaur 50‚® and Solar Taurus‚® markets.In the year we have worked on a number of turbine package refurbishment andcompressor restaging projects for a range of clients including Williams and PSIMidstream. We continue to increase the amount of business under long termcontracts and have entered into a global framework agreement to provideaftermarket services to turbines across a major international oil company'sglobal downstream operations. In addition, Rolls Wood Group will perform theengine overhauls under a Rolls-Royce eight year contract with BP for themaintenance of 28 RB211 turbines in Azerbaijan.Power & IndustrialOur power & industrial activities provide support for turbines that are usedfor power generation and industrial applications, and represent around twothirds of Gas Turbine Services revenue. The growth in the global demand forpower is driving an increase in the running hours of installed gas turbineequipment and this, in turn, leads to an increasing demand for aftermarketservices. We have focused on increasing the proportion of our business underlonger term contracts and been successful in winning a range of termmaintenance agreements, including the maintenance of advanced technologyturbines in the US with the New York Power Authority (NYPA), with Air Liquidein the Netherlands, BASF in China and Zielona Gora in Poland. Our activitiesdelivering long term operations & maintenance services to the power sector havealso grown strongly in the period, including recently securing a three yearcontract to provide operations and maintenance services to a greenfield plantwith four GE LMS100 gas turbines in California. We now have more than 50 longerterm contracts covering facilities with 12,000MW (2006: 8,000MW) of powergeneration, broadly equivalent to the capacity required by 12 million homes inthe US.The tightening of demand for power that we are seeing, particularly indeveloping economies, can lead to power shortages and a need for fast trackpower packages. We have significant competitive advantage in our ability tolocate, refurbish, install, warrant, operate and maintain equipment and havesecured a number of contracts to provide fast track power packages in variouslocations, including Ghana, Pakistan and the US.Gas Turbine Services outlookWe anticipate that the oil & gas turbine maintenance, repair and overhaulrequirements will remain robust and that we will see continued strengthening ofthe power market worldwide. We aim to move more of our business to highermargin areas, including increasingly providing longer term solutions, fromapproximately 40% at present to around 60% by 2010, and continue our ongoingcost reduction and efficiency initiatives. A further key focus is internationalexpansion, particularly into the eastern hemisphere where the fastest rates ofincrease in the demand for power are expected to occur. Overall, we continue tohave a clear objective to increase EBITA margin to 10% by 2010.Financial Review 2007$m 2006$m Increase Revenue 4,432.7 3,468.8 +28% EBITA * 318.4 215.1 +48% EBITA margin 7.2% 6.2% Amortisation 10.6 7.6 +39%

Impairment and restructuring charges and 22.6 - profit on disposal of interest in joint

venture Operating profit 285.2 207.5 +37% Net finance expense 25.3 23.9 +6% Profit before tax 259.9 183.6 +42% Tax 91.0 62.4 +46% Profit for the year 168.9 121.2 +39% Basic EPS (cents) 33.0c 24.4c +35% Adjusted diluted EPS (cents) 36.9c 24.5c +51% Dividend per share (cents) 7.0c 5.0c +40%

* Key performance indicator included in incentive schemes

Group revenue, EBITA and EBITA margin showed strong overall growth in 2007,with increases in all three divisions. Revenue increased by 28% to $4,432.7m,EBITA increased by 48% to $318.4m and EBITA margin increased by 1.0% point to7.2%.

A detailed review of the trading performance is contained within the Chief Executive's operational review.

The amortisation charge of $10.6m (2006: $7.6m) included one month ofamortisation on the other intangible assets acquired as part of the IMVacquisition. The total amount of IMV other intangible assets was $28.7m, andthis amount will be amortised over 10 years, based on the anticipated economicbenefit of the assets.

Impairment and restructuring charges and profit on disposal of interest in joint venture are outlined below

2007$m 2006$m

Closure of Dundee component repair 16.5 - facilities

Impairment of discontinuing aero 7.2 - overhaul activities

Other impairments 2.5 -

Profit on disposal of interest in (3.6) - joint venture

22.6 -

The cash element of the total impairment and restructuring charges of $22.6m will be around $11m to be incurred over 2007 and 2008.

Our net finance expense for the period was up 6% to $25.3m, principally reflecting an increase in the average interest rate payable during the year.

The movement in the tax charge is outlined below

2007$m 2006$m Change Tax charge 91.0 62.4 +46% Tax on impairment and 3.5 - restructuring charges and profit on disposal of interest in joint venture Adjusted tax charge 94.5 62.4 +51% Profit before tax 259.9 183.6 +42% Impairment and restructuring 22.6 - charges and profit on disposal of interest in joint venture Amortisation of other intangible 2.0 1.1 assets on acquisitions Adjusted profit before tax 284.5 184.7 +55% Effective tax rate 33.2% 33.8% The reduction in the Group's effective tax rate reflects the higher percentageof the Group's profits earned in lower taxed countries, and some underlying taxrate reductions around the world.

Going forward, we expect to see some further reduction in the effective tax rate due to a number of factors, including

- a trend of reducing corporate tax rates worldwide- the likelihood that a greater proportion of the Group's profits will be madein relatively lower taxed countries- the continuing focus of management on a range of tax efficienciesThe final dividend of 5.0 cents results in a full year dividend of 7.0 cents,up 40% from lastCash Flow 2007 $m 2006 $m Opening net debt (257.9) (245.8) EBITA 318.4 215.1 Depreciation and other 75.9 63.6 non-cash items Cash generated from 394.3 278.7 operations before working capital movements

Working capital movements (55.3) (53.6)

Cash generated from 339.0 225.1 operations Acquisitions (125.8) (50.4) Capex and intangible (92.6) (86.3) assets Disposals 9.0 7.3 Issue of shares/sale of 16.4 1.8 trust shares Tax paid (105.9) (57.0) Interest, dividends and (60.1) (52.6) other Increase in net debt (20.0) (12.1) Closing net debt (277.9) (257.9) Cash flow generation increased significantly in 2007, with cash generated fromoperations before working capital increasing $115.6m or 41% to $394.3.0m. Theworking capital outflows during the year of $55.3m (2006: $53.6m) reflected thestrong overall revenue growth of $963.9m, and included an increase of $112.7min inventories and an increase of $74.4m in trade and other receivables, partlyoffset by an increase of $131.8m in trade and other payables. Net workingcapital, the total of inventory, trade and other receivables, less trade andother payables, as a percentage of annual revenue fell from 14.6% to 12.2% andthis improved working capital position reflects higher growth in areas ofrelatively lower capital intensity, and successful management focus on capitalefficiency.The Group continued to invest in its future growth, with expenditure of $218.4m(2006: $136.7m) on acquisitions, capital expenditure and intangible assets. Theinvestment in acquisitions of $125.8m (2006: $50.4m) included the acquisitionof IMV. Cash payable at completion of the IMV acquisition amounted to $116.6mwith further cash payments due in the period to 2014 based on the futureperformance of the company. Capital expenditure in the year increased by $4.3mto $80.8m (2006: $76.5m), the increase in part driven by investments being madein our manufacturing capacity in Well Support.Capital Structure 2007 $m 2006 $m Long term borrowings - Fixed rate 175.0 203.9 - Floating rate 174.9 152.8 Total long term borrowings 349.9 356.7 Short term borrowings 45.1 41.5 Total borrowings 395.0 398.2 Cash (117.1) (140.3) Net debt 277.9 257.9 Total shareholders equity 974.6 802.3 Gearing ratio 29% 32% Net debt/EBITDA 0.7 x 1.0 x Interest cover 12.6 x 9.0 x

Operating Capital Employed/Revenues 19.0% 22.4% (OCER) *

Return on Capital Employed (ROCE) * 28.3% 21.5%

*Key performance indicator included in incentive schemes

Net debt at 31 December 2007 increased by $20.0m to $277.9m. Long termborrowings amounted to $349.9m (2006: $356.7m) with interest payable atvariable rates. Interest rate swaps have been entered into in respect of$175.0m (2006: $203.9m), or 50% (2006: 57%), of total long term borrowings andthese have the effect of converting the borrowings to fixed rates of interestwith maturities ranging from 2008 to 2010.The Group's borrowings are principally denominated in US dollars, UK sterlingand Canadian dollars. Whenever possible, foreign currency borrowings are usedto hedge the Group's net investment in non US dollar entitiesAt 31 December 2007, the Group had unutilised borrowing facilities of $474.4m(2006: $441.9m) representing 55% (2006: 53%) of total borrowing facilities.During February 2008, the Group increased its committed facilities by an amountof $200m.In addition, the Group has a number of facilities covering the issue of bonds,guarantees and letters of credit amounting to $257.7m (2006: $167.2m). As at 31December 2007, these facilities were 66% (2006: 55%) utilised.The Group's gearing ratio has reduced from 32% to 29%, the ratio of net debt toEBITDA (earnings before interest, tax, depreciation and amortisation) fell from1.0 times to 0.7 times and interest cover increased to 12.6 times compared to9.0 times. These improvements principally reflect the strong profit growth inthe year.The ratio of Operating Capital Employed to Revenue ("OCER") reduced from 22.4%to 19.0% as a result of higher growth in areas of relatively lower capitalintensity and working capital efficiency measures taken. The OCER measure isused as it has specific focus on the amount of operating capital required tosupport revenue.The Group's Return on Capital Employed ("ROCE") increased from 21.5% to 28.3%.This increase largely reflects the improved margin from 6.2% to 7.2 % and theimprovement in OCER referred to above.

Group income statement for the year to 31 December 2007

Note 2007 2006 $m $m Revenue 1 4,432.7 3,468.8 Cost of sales (3,506.4) (2,768.0) Gross profit 926.3 700.8 Administrative expenses:

Profit on disposal of interest in joint venture 4 3.6 - Impairment and restructuring charges 5 (26.2) - Other administrative expenses (618.5) (493.3) Administrative expenses (641.1) (493.3) Operating profit 1 285.2 207.5 Finance income 2 7.4 5.3 Finance expense 2 (32.7) (29.2) Profit before taxation 3 259.9 183.6 Taxation 6 (91.0) (62.4) Profit for the year 168.9 121.2 Attributable to: Equity shareholders 165.0 120.5 Minority interest 26 3.9 0.7 168.9 121.2

Earnings per share (expressed in cents per share)

Basic 8 33.0 24.4 Diluted 8 31.7 23.4

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 December2007 Note 2007 2006 $m $m Profit for the year 168.9 121.2

Actuarial gains on retirement benefit liabilities 30 2.6 8.5 Movement in deferred tax relating to retirement (0.8) (2.6) benefit liabilities Cash flow hedges (3.5) 0.8

Tax on foreign exchange losses recorded in reserves 0.3 3.2 Exchange differences on retranslation of foreign 7.0 5.6

currency net assets Total recognised income for the year 174.5

136.7

Total recognised income for the year is attributable

to: Equity shareholders 170.6 136.0 Minority interest 3.9 0.7 174.5 136.7

Group balance sheet as at 31 December 2007

Note 2007 2006 $m $m Assets Non-current assets Goodwill and other intangible assets 9 576.1

385.5

Property plant and equipment 10 272.3 247.9 Long term receivables 2.8 5.2

Derivative financial instruments 18 0.8 2.6

Deferred tax assets 20 51.1 36.6 903.1 677.8 Current assets Inventories 12 539.2 424.1 Trade and other receivables 13 894.9 792.5 Income tax receivable 15.5 8.7

Derivative financial instruments 18 0.7 1.3

Cash and cash equivalents 14 117.1 140.3 1,567.4 1,366.9 Liabilities Current liabilities Borrowings 16 45.1 41.5

Derivative financial instruments 18 1.5 0.9

Trade and other payables 15 891.6 710.8 Income tax liabilities 46.4 37.7 984.6 790.9 Net current assets 582.8 576.0 Non-current liabilities Borrowings 16 349.9 356.7

Derivative financial instruments 18 1.2 0.1

Deferred tax liabilities 20 5.6 7.3

Retirement benefit liabilities 30 11.3 24.9 Other non-current liabilities 17 95.3 31.2

Provisions 19 36.7 23.6 500.0 443.8 Net assets 985.9 810.0 Shareholders' equity Share capital 22 26.0 25.5 Share premium 23 303.6 294.1 Retained earnings 24 555.9 397.4 Other reserves 25 89.1 85.3 Total shareholders' equity 974.6 802.3 Minority interest 26 11.3 7.7 Total equity 985.9 810.0

The financial statements on pages 2 to 47 were approved by the board of directors on 3 March 2008

Allister G Langlands, Director

Alan G Semple, Director

Group cash flow statement for the year to 31 December 2007

Note 2007 2006 $m $m

Cash generated from operations 27 339.0 225.1

Tax paid (105.9) (57.0)

Net cash from operating activities 233.1 168.1 Cash flows from investing activities Acquisition of subsidiaries (net of cash and 28 (112.0) (26.0) borrowings acquired) Acquisition of minority interests (0.2)

(20.2)

Deferred consideration payments 28 (13.6) (4.2) Proceeds from disposal of interest in joint venture 4 9.0 -

(net of borrowings disposed) Disposal of subsidiaries - 7.3 Purchase of property plant and equipment (80.8)

(76.5)

Proceeds from sale of property plant and equipment 4.2 8.4 Purchase of intangible assets (11.8) (9.8) Proceeds from disposal of other intangible assets 0.2 - Investment by minority shareholders 26 1.4 - Net cash used in investing activities (203.6)

(121.0)

Cash flows from financing activities Proceeds from issue of ordinary shares (net of 0.2 0.4

expenses) Repayment of bank loans (18.1) (17.5)

Disposal of shares in employee share trusts 16.2 1.4

Interest received 5.8 4.5 Interest paid (32.0) (29.4) Dividends paid to shareholders 7 (27.6)

(20.8)

Dividends paid to minority shareholders 26 (1.5) (1.5) Net cash used in financing activities (57.0)

(62.9)

Effect of exchange rate changes on cash and cash 4.3 6.2

equivalents

Net decrease in cash and cash equivalents (23.2) (9.6) Opening cash and cash equivalents 140.3 149.9 Closing cash and cash equivalents 14 117.1 140.3

Notes to the financial statements for the year to 31 December 2007

Accounting Policies

Basis of preparation

These financial statements have been prepared in accordance with IFRS and IFRICinterpretations adopted by the European Union (`EU') and with those parts ofthe Companies Act 1985 applicable to companies reporting under IFRS. The Groupfinancial statements have been prepared under the historical cost convention asmodified by the revaluation of financial assets and liabilities held fortrading.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 and expensesduring the year. These estimates and assumptions are continually evaluated andare based on historical experience and other factors, including expectations offuture events that are believed to be reasonable under the circumstances.Although these estimates are based on management's best knowledge of theamount, event or actions, actual results ultimately may differ from thoseestimates.

Significant accounting policies

The Group's significant accounting policies adopted in the preparation of thesefinancial statements are set out below. These policies have been consistentlyapplied 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 accounting policiesand 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.

The following exchange rates have been used in the preparation of theseaccounts: 2007 2006 Average rate ‚£1 = $ 1.9995 1.8427 Closing rate ‚£1 = $ 1.9906 1.9572 Foreign currenciesIncome 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, together withthose differences resulting from the restatement of profits and losses fromaverage 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 recognitionRevenue 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 amount ofrevenue can be measured reliably. Revenue from services is recognised as theservices are rendered, including where they are based on contractual rates perman hour in respect of multi-year service contracts. Incentive performancerevenue is recognised upon completion of agreed objectives. Revenue fromproduct sales is recognised when the significant risks and rewards of ownershiphave been transferred to the buyer, which is normally upon delivery of productsand customer acceptance, if any. Where revenue relates to a multi-elementcontract, then each element of the contract is accounted for separately.Revenue is 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. Intangibleassets are recognised if it is probable that there will be future economicbenefits attributable to the asset, the cost of the asset can be measuredreliably, the asset is separately identifiable and there is control over theuse of the asset. Where the Group acquires a business, other intangible assetssuch as customer contracts are identified and evaluated to determine thecarrying value on the acquisition balance sheet. Other intangible assets areamortised over their estimated useful lives, as follows:

Computer software : 3-5 years

Other intangible assets: 1-10 years

Property plant and equipmentProperty plant and equipment (PP&E) is stated at cost less accumulateddepreciation and impairment. No depreciation is charged with respect tofreehold land and assets in the course of construction. Transfers from PP&E tocurrent 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 theGroup takes into account are the durability of the assets, the intensity atwhich the assets are expected to be used and the expected rate of technologicaldevelopments.

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 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 costs areadjusted, where appropriate, to correlate closely the standard costs to theactual 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 equivalentsCash and cash equivalents include cash in hand and other short-term bankdeposits with maturities of three months or less and bank overdrafts wherethere is a right of set-off. Bank overdrafts are included within borrowings incurrent liabilities where there is no right of set-off.Trade receivablesTrade 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 collect allamounts due according to the original terms of the receivables. The amount ofthe 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 considerationWhere 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. Wheredeferred consideration is payable after more than one year the estimatedliability is discounted using an appropriate rate of interest.

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 that aretaxable or deductible in a different period. The Group's liability for currenttax is calculated using tax rates enacted or substantively enacted at thebalance sheet date.Deferred 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 determine deferredtax.

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 method ofrecognising 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 (fair valuehedge); (2) hedges of highly probable forecast transactions (cash flow hedge);or (3) hedges of net investments in foreign operations (net investment hedge).Where hedging is to be undertaken, the Group documents the relationship betweenthe hedging instrument and the hedged item at the inception of the transaction,as well as its risk management objective and strategy for undertaking the hedgetransaction. The Group also documents its assessment, both at hedge inceptionand on an ongoing basis, of whether the derivatives that are used in hedgingtransactions are highly effective in offsetting changes in fair values or cashflows of the hedged items. The Group performs effectiveness testing on aquarterly basis.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in administrative expenses 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 hedgeThe effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges is recognised in the hedging reservein equity. The gain or loss relating to the ineffective portion is recognisedimmediately in administrative expenses in the income statement. Amountsaccumulated in equity are recycled through the income statement in periods whenthe hedged item affects profit or loss.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 hedgeHedges 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 the currency translationreserve in equity; the gain or loss relating to the ineffective portion isrecognised immediately in administrative expenses in the income statement.Gains and losses accumulated in equity are included in the income statementwhen the foreign operation is disposed of.Derivatives that are not designated as hedgesCertain derivatives, whilst providing effective economic hedges are notdesignated as hedges. Changes in the fair value of any derivative instrumentsthat are not designated for hedge accounting are recognised immediately inadministrative expenses in the income statement.Fair value estimationThe 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 lesseePayments 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 lessorOperating lease rental income arising from leased assets is recognised in theincome statement on a straight line basis over the period of the lease.Finance leasesAs lesseeAssets 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 lessorFinance lease rental income arising from leased assets is recognised in theincome statement so as to produce a constant rate of return on the net cashinvestment. Amounts receivable under finance leases represent the outstandingamounts due under these agreements less amounts allocated to future periods.Retirement benefit liabilitiesThe Group operates a defined benefit scheme and a number of definedcontribution schemes. The liability recognised in respect of the definedbenefit scheme represents the present value of the defined benefit obligationsless the fair value of the scheme assets. The assets of this scheme are held inseparate trustee administered funds. The defined benefit scheme's assets aremeasured using market values. Pension scheme liabilities are measured annuallyby an independent 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 the liabilitiesof the Group's defined benefit scheme expected to arise from employee servicein the period is charged to operating profit. The expected return on the schemeassets and the increase during the period in the present value of the scheme'sliabilities arising from the passage of time are included in finance income/expense. Actuarial gains and losses are recognised in the Group statement ofrecognised income and expense in full in the period in which they occur.

The defined benefit scheme's net assets or net liabilities are recognised in full and presented on the face of the 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 have alegal 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. Where amounts provided are payable after more thanone year the estimated liability is discounted using an appropriate rate ofinterest.

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 grantedat market value. A charge is booked to the income statement as an employeebenefit expense for the fair value of share options expected to be exercised,accrued over the vesting period. The corresponding credit is taken to retainedearnings. The fair value is calculated using an option pricing model.Share options granted under the Long Term Retention Plan (`LTRP') are grantedat par value. The charge to the income statement for LTRP shares is alsocalculated using an option pricing model and, as with ESOS grants, the fairvalue of the share options expected to be exercised is accrued over the vestingperiod. 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 the achievementof certain performance targets. The charge to the income statement for sharesawarded under the LTIS is based on the fair value of those shares at the grantdate, spread over the vesting period. The corresponding credit is taken toretained earnings. For those awards that have a market related performancemeasure, the fair value of the market related element is calculated using aMonte Carlo simulation model.

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

Share capitalJohn 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 and Production Facilities offers a wide range of engineeringservices to the upstream, midstream, downstream and industrial sectors. Theseinclude engineering, project and construction management, refinery upgrades andoperational enhancement. It also offers life of field support to producingassets through brownfield engineering and modifications, productionenhancement, operations management, maintenance management and abandonmentservices.

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

Gas Turbine Services is an independent provider of integrated maintenance solutions and repair and overhaul services for industrial gas turbines and related accessories used for power generation, compression and transmission in the oil and gas and power generation industries.

Disclosure of impact of new and future accounting standards

The following standards, amendments and interpretations to published standards were mandatory for the year ended 31 December 2007.

IFRS 7 Financial instruments disclosures

The application of IFRS 7 has resulted in additional dislosures in the Groupaccounts in notes 13 and 18. The application of IFRS 7 has not had a materialimpact on the Group's income statement, balance sheet or cash flow statement.

IFRIC 8 Scope of IFRS 2

IFRIC 10 Interim financial reporting and impairment

The application of IFRIC 8 and IFRIC 10 did not have a material impact on the financial statements.

The Group has not yet adopted the following standards which are only effective for periods commencing on or after 1 January 2009.

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.

IFRS 3 (revised) Business Combinations

This standard includes some significant changes to IFRS 3 in respect ofbusiness combinations with all payments made to purchase a business recorded atfair value at acquisition date. This standard is effective from 1 July 2009 andwill have an impact on any acquisitions the Group makes from that date.

1 Segmental reporting

Primary reporting format - business segments

Revenue EBITDA(1) EBITA(1) Operating profit Year Year Year Year Year Year Year Year ended31 ended ended ended ended ended31 ended ended Dec 31 Dec 31 Dec 31 Dec 31 Dec Dec 31 Dec 31 Dec 2007 2006 2007 2006 2007 2006 2007 2006 $m $m $m $m $m $m $m $m Engineering & 2,582.8 1,972.7 229.3 155.3 214.5 141.9 209.1 138.0 Production Facilities Well Support 862.1 739.1 113.0 93.9 87.1 73.6 87.0 73.5 Gas Turbine Services 955.7 713.7 82.5 54.1 64.3 38.0 44.1 34.7 Central costs (4) - - (44.8) (37.7) (45.5) (38.4) (45.5) (38.5) Total excluding 4,400.6 3,425.5 380.0 265.6 320.4 215.1 294.7 207.7 discontinuing operations Gas Turbine Services 32.1 43.3 (1.3) 0.9 (2.0) - (9.5) (0.2) - discontinuing operations (2) 4,432.7 3,468.8 378.7 266.5 318.4 215.1 285.2 207.5 Finance income 7.4 5.3 Finance expense (32.7) (29.2) Profit before 259.9 183.6 taxation Taxation (91.0) (62.4) Profit for the year 168.9 121.2 NotesEBITDA represents operating profit of $285.2m (2006 : $207.5m) before profit ondisposal of interest in joint venture of $3.6m (2006 : $nil), impairment andrestructuring charges of $26.2m (2006 : $nil), depreciation of $60.3m (2006 :$51.4m) and amortisation of $10.6m (2006 : $7.6m). EBITA represents EBITDA lessdepreciation. EBITA and EBITDA are provided as they are units of measurementused by the Group in the management of its business.

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

Revenue arising from sales between segments is not material.

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

Segment assets and liabilities

Engineering Well Gas Discontinuing Unallocated Total & Support Turbine Operations At 31 December 2007 Production Services Facilities $m $m $m $m $m $m Segment assets 1,057.6 586.5 645.2 32.9 148.3 2,470.5 Segment liabilities 590.3 181.6 233.8 7.5 471.4 1,484.6At 31 December 2006 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

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

2007 Engineering Well Gas Discontinuing Unallocated Total & Support Turbine Operations Production Services Facilities $m $m $m $m $m $m Capital expenditure - Property plant and 21.4 43.0 14.9 2.5 0.3 82.1 equipment - Intangible assets 4.8 - 7.0 - - 11.8 Non-cash expense/ (income) - Depreciation 14.8 25.9 18.2 0.7 0.7 60.3 - Amortisation of 6.5 0.1 3.7 0.3 - 10.6 other intangible assets - Profit on disposal (3.6) - - - - (3.6)of interest in joint venture - Impairment and 2.5 - 15.3 7.2 - 25.0 restructuring charges

The cash impact of the impairment and restructuring charges in the year was $1.2m and related to the charges in the Gas Turbine Services division.

2006 $m $m $m $m $m $m Capital expenditure - Property plant and 15.0 36.0 23.1 2.3 0.1 76.5 equipment - Intangible assets 3.8 0.2 5.8 - - 9.8 Non-cash expenses - Depreciation 13.4 20.3 16.1 0.9 0.7 51.4 - Amortisation of other 3.9 0.1 3.3 0.2 0.1 7.6 intangible assets

Secondary format - geographical segments

Revenue Segment assets Capital expenditure 2007 2006 2007 2006 2007 2006 $m $m $m $m $m $m Europe 1,324.0 1,031.3 546.2 486.0 17.1 18.1 North America 1,950.6 1,514.2 1,270.0 1,059.6 50.0 51.7 Rest of the World 1,158.1 923.3 654.3 499.1 26.8 16.5 4,432.7 3,468.8 2,470.5 2,044.7 93.9 86.3 Revenue by geographical segment is based on the geographical location of thecustomer. Segment assets and capital expenditure is based on the location ofthe relevant Group business. 2007 2006 $m $m

Revenue by category is as follows:

Sale of goods 653.7 550.5 Rendering of services 3,779.0 2,918.3 4,432.7 3,468.8 2 Finance expense/(income) 2007 2006 $m $m

Interest payable on bank borrowings 31.3 28.7 Unwinding of discount on deferred consideration 1.4 0.5

Finance expense 32.7 29.2 Interest receivable on short term deposits (5.8)

(4.5)

Other interest income (note 30) (1.6) (0.8) Finance income (7.4) (5.3) Finance expense - net 25.3 23.9 3 Profit before taxation 2007 2006 $m $m

The following items have been charged/(credited) in arriving

at profit before taxation: Employee benefits expense (note 29) 1,618.0

1,276.0

Cost of inventory recognised as an expense (included in cost 413.8 287.4 of sales) Impairment of inventory 19.0 14.6

Depreciation of property plant and equipment 60.3 51.4 Amortisation of other intangible assets 10.6 7.6 Gain on disposal of property plant and equipment (1.2)

(1.4)

Other operating lease rentals payable:

- Plant and machinery 23.3 20.5 - Property 46.1 41.4

Net exchange loss on foreign currency borrowings less 10.6 13.8

deposits

Loss/(gain) on fair value of unhedged derivative financial 0.7 (0.6) instruments

Services provided by the Group's auditor and network firms

During the year the Group obtained the following services from its auditor and network firms at costs as detailed below:

2007 2006 $m $m Audit services

- Fees payable for audit of parent company and consolidated 0.9 0.8

accounts Non-audit services

Fees payable to the Group auditor and its network firms for

other services

- Audit of Group companies pursuant to legislation 1.4 1.0

- Tax services 0.3 0.3 - Other services 0.1 0.1 2.7 2.2

4 Profit on disposal of interest in joint venture

2007 2006 $m $m

Profit on disposal of interest in joint venture 3.6 - In July 2007, the Group disposed of its shareholding in one of its jointventures in the Engineering & Production Facilities division. A gain of $3.6mhas been booked in respect of this transaction and tax of $1.1m has beenprovided. The disposal resulted in proceeds of $9.0m during the year (net ofborrowings disposed).

5 Impairment and restructuring charges

2007 2006 $m $m

Impairment and restructuring charges 26.2 - The Group recorded impairment and restructuring charges of $16.5m in the GasTurbine Services division in respect of rationalisation of businesses andfacilities, severance costs and impairment of property plant and equipment. Animpairment charge of $7.2m has been booked in the Gas Turbine Services division- discontinuing operations in respect of property plant and equipment and otherintangible assets. In addition, the Group impaired goodwill of $2.5m in theEngineering & Production Facilities division. The tax charge (see note 6)includes a tax credit of $4.6m in relation to the impairment and restructuringcharges.6 Taxation 2007 2006 $m $m Current tax - Current year 115.8 85.7 - Adjustment in respect of prior years (8.4) (4.9) 107.4 80.8 Deferred tax Relating to origination and reversal of temporary differences (16.4) (18.4) Total tax charge 91.0 62.4

Tax on items charged to equity 2007 2006

$m $m

Deferred tax movement on retirement benefit liabilities 0.8 2.6 Current tax credit on exchange movements offset in reserves (0.3) (3.2) 0.5 (0.6) Tax is calculated at the rates prevailing in the respective jurisdictions inwhich the Group operates. The expected rate is the weighted average rate takinginto account the Group's profits in these jurisdictions. The expected rate hasdecreased in 2007 due to the change in profitability of the Group'ssubsidiaries in their respective jurisdictions. The tax charge for the year islower (2006 : lower) than the expected tax charge due to the following factors: 2007 2006 $m $m Profit before taxation 259.9 183.6

Profit before tax at expected rate of 35.3% (2006: 36.4%) 91.7 66.8

Effects of: Adjustments in respect of prior years (8.4)

(4.9)

Non-recognition of losses and other attributes 1.9 7.4

Other permanent differences 5.8 (6.9) Total tax charge 91.0 62.4 7 Dividends 2007 2006 $m $m Dividends on equity shares

Final dividend paid - year ended 31 December 2006 : 3.5 cents 17.6 13.4

(2006: 2.7 cents) per share

Interim dividend paid - year ended 31 December 2007 : 2.0 10.0 7.4 cents (2006: 1.5 cents) per share

27.6 20.8 The directors are proposing a final dividend in respect of the financial yearended 31 December 2007 of 5.0 cents per share which will absorb an estimated$25.4m of shareholders' funds. The final dividend will be paid on 26 May 2008to shareholders who are on the register of members on 21 March 2008. Thefinancial statements do not reflect this dividend payable.8 Earnings per share 2007 2006 Earnings Number of Earnings Earnings Number of Earnings attributable shares per attributable shares per to equity (millions) share to equity share shareholders$m (cents) shareholders (millions) (cents) $m Basic 165.0 500.6 33.0 120.5 494.7 24.4 Effect of dilutive 19.2 (1.3) - 19.4 (1.0) ordinary shares Diluted 165.0 519.8 31.7 120.5 514.1 23.4 Amortisation, net of tax 7.7 - 1.5 5.4 - 1.1 Profit on disposal of (2.5) - (0.5) - - - interest in joint venture, net of tax Impairment and 21.6 - 4.2 - - - restructuring charges, net of tax Adjusted diluted 191.8 519.8 36.9 125.9 514.1 24.5 Adjusted basic 191.8 500.6 38.3 125.9 494.7 25.4

The calculation of basic earnings per share for the year ended 31 December 2007is based on the earnings attributable to equity shareholders divided by theweighted average number of ordinary shares in issue during the year excludingshares held by the Group's employee share ownership trusts. For the calculationof diluted earnings per share, the weighted average number of ordinary sharesin issue 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 basic and diluted earnings per share is disclosed to show theresults excluding the impact of amortisation, impairment and restructuringcharges and profit on disposal of interest in joint venture, net of tax.

9 Goodwill and other intangible assets

Goodwill Computer Other Total software $m $m $m $m Cost At 1 January 2007 355.7 29.1 32.8 417.6 Exchange differences 14.8 0.5 3.3 18.6 Additions - 6.7 5.1 11.8 Acquisitions 146.5 0.5 28.7 175.7 Disposals (0.2) (0.8) (0.2) (1.2) Reclassification from current - - 0.8 0.8 assets At 31 December 2007 516.8 36.0 70.5 623.3 Aggregate amortisation and 0.4 18.3 13.4 32.1 impairment At 1 January 2007 Exchange differences - 0.3 0.6 0.9

Amortisation charge for the year - 5.3 5.3 10.6 Impairment charge for the year 2.5 - 1.9 4.4

Disposals - (0.6) (0.2) (0.8) At 31 December 2007 2.9 23.3 21.0 47.2

Net book value at 31 December 2007 513.9 12.7 49.5 576.1

Cost At 1 January 2006 312.5 22.1 16.7 351.3 Exchange differences 4.8 1.9 0.7 7.4 Additions - 5.1 4.7 9.8 Acquisitions 38.4 - 8.2 46.6

Reclassification from property - - 0.9 0.9

plant and equipment

Reclassification from current - - 1.6 1.6

assets At 31 December 2006 355.7 29.1 32.8 417.6 Aggregate amortisation and 0.4 13.1 9.2 22.7

impairment At 1 January 2006

Exchange differences - 1.3 0.5 1.8

Amortisation charge for the year - 3.9 3.7 7.6

At 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 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 2008-9 budgets. Cash flows for 2010-12are assumed to grow at a rate of 5% per annum and subsequent cash flows havebeen assumed to grow at 3% per annum. The cash flows have been discounted usinga pre-tax discount rate of 10%. Goodwill of $2.5m was impaired in 2007 (2006 :$nil).

The carrying amounts of goodwill by division are: Engineering & Production Facilities $392.0m (2006 : $234.4m), Gas Turbine Services $88.4m (2006 : $87.4m) and Well Support $33.5m (2006 : $33.5m).

Other includes development costs, licences and customer contracts and relationships. Development costs with a net book value of $11.6m (2006 : $8.7m) are internally generated intangible assets.

10 Property plant and equipment

Land and Land and Plant and Total buildings buildings equipment - Long - Short leasehold leasehold and freehold $m $m $m $m Cost At 1 January 2007 53.3 18.3 443.7 515.3 Exchange differences 1.5 0.3 6.2 8.0 Additions 6.6 2.4 73.1 82.1 Acquisitions 0.2 2.4 2.8 5.4 Disposals (0.7) (0.3) (18.3) (19.3)

Disposals of interest in joint - - (0.8) (0.8)

venture

Reclassification as current assets - - (1.5) (1.5)

At 31 December 2007 60.9 23.1 505.2 589.2 Accumulated depreciation and impairment At 1 January 2007 21.1 10.6 235.7 267.4 Exchange differences 0.3 0.1 3.1 3.5 Charge for the year 3.3 1.2 55.8 60.3 Impairment 1.8 - 7.7 9.5 Disposals (0.3) (0.2) (15.8) (16.3)

Disposals of interest in joint - - (0.3) (0.3)

venture

Reclassification as current assets - - (7.2) (7.2)

At 31 December 2007 26.2 11.7 279.0 316.9

Net book value at 31 December 2007 34.7 11.4 226.2 272.3

Cost At 1 January 2006 52.1 15.9 372.2 440.2 Exchange differences 0.5 1.0 12.1 13.6 Additions 1.4 1.5 73.6 76.5 Acquisitions - - 3.2 3.2 Disposals (0.7) (0.1) (14.8) (15.6) Reclassification as other - - (0.9) (0.9) intangible assets

Reclassification as current assets - - (1.7) (1.7)

At 31 December 2006 53.3 18.3 443.7 515.3 Accumulated depreciation and impairment At 1 January 2006 18.6 8.7 193.4 220.7 Exchange differences 0.1 0.5 7.6 8.2 Charge for the year 2.8 1.5 47.1 51.4 Disposals (0.4) (0.1) (8.6) (9.1)

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

At 31 December 2006 21.1 235.7 267.4

Net book value at 31 December 2006 32.2 7.7 208.0 247.9 Plant and equipment includes assets held for lease to customers under operatingleases of $40.0m (2006: $37.4m). Additions during the year amounted to $9.7m(2006 : $12.4m) and depreciation totalled $13.2m (2006 : $9.1m). The gross costof these assets at 31 December 2007 is $62.0m (2006 : $52.3m) and aggregatedepreciation is $22.0m (2006 : $14.9m).

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 $12.3m (2006 : $11.6m).

11 Joint ventures

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

2007 2006 $m $m Non-current assets 53.5 55.4 Current assets 222.7 218.4 Non-current liabilities (15.3) (8.8) Current liabilities (139.5) (162.7) Net assets 121.4 102.3 Income 422.8 397.5 Expenses (379.8) (366.8) Profit before tax 43.0 30.7 Tax (11.9) (8.8)

Share of post tax results from joint ventures 31.1 21.9 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 2007 2006 $m $m Materials 71.5 74.5 Work in progress 130.7 69.1 Finished goods and goods for resale 337.0 280.5 539.2 424.1

13 Trade and other receivables

2007 2006 $m $m Trade receivables 799.7 691.2 Less: provision for impairment of trade receivables (44.2) (23.6) Trade receivables - net 755.5 667.6

Amounts recoverable on contracts 14.9 15.2 Amounts receivable under finance leases - 7.8 Prepayments and accrued income 59.5 54.8

Other receivables 65.0 47.1 894.9 792.5 There are no amounts receivable under finance leases at 31 December 2007 (2006:$11.4m). Rentals receivable during the year under finance leases amounted to$11.4m (2006: $12.4m). At 31 December 2006 amounts receivable under financeleases of $3.6m were included in long term receivables.

The Group's trade receivables balance is analysed by division below:-

Trade Provision Trade Receivable Receivables for Receivables days - Gross impairment - Net 31 December 2007 $m $m $m Engineering & Production 462.7 (9.3) 453.4 55 Facilities Well Support 165.5 (27.5) 138.0 54 Gas Turbine Services 171.5 (7.4) 164.1 42 Total Group 799.7 (44.2) 755.5 53 31 December 2006 Engineering & Production 374.8 (7.0) 367.8 49 Facilities Well Support 144.4 (11.1) 133.3 61 Gas Turbine Services 172.0 (5.5) 166.5 47 Total Group 691.2 (23.6) 667.6 52

Receivable days are calculated by allocating the closing trade receivablesbalance to current and prior period revenue including sales taxes. A receivabledays calculation of 53 indicates that closing trade receivables represent themost recent 53 days of revenue. A provision for the impairment of tradereceivables is established when there is objective evidence that the Group willnot be able to collect all amounts due according to the terms of the originalreceivables.The ageing of the provision for impairment of trade receivables is as follows: 2007 2006 $m $m Up to 3 months 6.1 2.8 Over 3 months 38.1 20.8 44.2 23.6 The movement on the provision for impairment of trade receivables by divisionis as follows:2007 Engineering Well Gas Total & Production Support Turbine Facilities Services $m $m $m $m At 1 January 7.0 11.1 5.5 23.6 Exchange differences 0.5 0.1 - 0.6 Charge to income statement 1.8 16.3 1.9 20.0 At 31 December 9.3 27.5 7.4 44.2 2006 At 1 January 4.1 3.5 3.8 11.4 Exchange differences 1.4 - 0.1 1.5 Charge to income statement 1.5 7.6 1.6 10.7 At 31 December 7.0 11.1 5.5 23.6

The charge to the income statement is included in administrative expenses.

The other classes within trade and other receivables do not contain impaired assets.

Included within gross trade receivables of $799.7m above (2006 : $691.2m) arereceivables of $199.6m (2006: $190.0m) which were past due but not impaired.These relate to customers for whom there is no recent history or expectation ofdefault. The ageing analysis of these trade receivables is as follows: 2007 2006 $m $m Up to 3 months 174.6 163.3 Over 3 months 25.0 26.7 199.6 190.0

14 Cash and cash equivalents

2007 2006 $m $m Cash at bank and in hand 98.8 85.8 Short-term bank deposits 18.3 54.5 117.1 140.3

The effective interest rate on short-term deposits was 6.2% (2006 : 5.3%) and these deposits have an average maturity of 12 days (2006 : 91 days).

At 31 December 2007 the Group held $10.7m of cash (2006: $54.5m) as security for standby letters of credit issued by the Group's insurance captive in relation to its reinsurance liabilities.

15 Trade and other payables

2007 2006 $m $m Trade payables 325.0 255.4 Other tax and social security payable 50.7

40.6

Accruals and deferred income 454.6 384.7 Deferred consideration 17.7 12.6 Other payables 43.6 17.5 891.6 710.8 16 Borrowings 2007 2006 $m $m

Bank loans and overdrafts due within one year or on demand

Unsecured 45.1 41.5 Non-current bank loans Unsecured 349.9 356.7 Bank loans are denominated in a number of currencies and bear interest based onLIBOR 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 sheet

date were as follows: 2007 2006 % % US Dollar 5.35 5.77 Sterling 6.40 5.74 Euro 5.08 4.14 Canadian Dollar 5.26 4.93 The carrying amounts of the Group's borrowings are denominated in the followingcurrencies: 2007 2006 $m $m US Dollar 116.0 190.3 Sterling 78.6 117.8 Euro 21.9 22.6 Canadian Dollar 151.5 43.7 Other 27.0 23.8 395.0 398.2 The Group is required to issue trade finance instruments to certain customers.These include tender bonds, performance bonds, retention bonds and advancepayment bonds. The Group also has in place documentary letters of credit tosecure payment from some customers and has issued standby letters of credit assecurity for local bank facilities. At 31 December 2007 the Group's bankfacilities relating to the issue of bonds, guarantees and letters of creditamounted to $257.7m (2006: $167.2m). At 31 December 2007, these facilities

were66% utilised (2006: 55%).Borrowing facilitiesThe Group has the following undrawn borrowing facilities available at 31December. 2007 2006 $m $m Expiring within one year 38.1 23.6

Expiring between one and two years - 8.9 Expiring in more than two years but not more than five years 436.3 409.4 474.4 441.9

All undrawn borrowing facilities are floating rate facilities. The facilities expiring within one year are annual facilities subject to review at various dates during 2008. The facilities have been arranged to help finance the Group's activities.

17 Other non-current liabilities

2007 2006 $m $m Deferred consideration 85.4 24.2 Other payables 9.9 7.0 95.3 31.2

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

18 Financial instruments

The Group's activities give rise to a variety of financial risks: market risk (including currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's overall risk management strategy is to hedge exposures wherever practicable in order to minimise any potential adverse impact on the Group's financial performance.

Risk management is carried out by the Group Treasury department in line withthe Group's Treasury policies. Group Treasury together with the Group'sbusiness units identify, evaluate and where appropriate, hedge financial risks.The Group's Treasury policies cover specific areas, such as foreign exchangerisk, interest rate risk, use of derivative financial instruments andinvestment of excess cash.Where the Board considers that a material element of the Group's profits andnet assets are exposed to a country in which there is significant geo-politicaluncertainty a report is prepared for the Board and a strategy agreed to ensurethat the risk is minimised.(a)Market risk(i)Foreign exchange riskThe Group is exposed to foreign exchange risk arising from various currencies.The Group also has a number of subsidiary companies whose revenue and expensesare denominated in currencies other than the US dollar. In order to protect theGroup's balance sheet from movements in exchange rates, wherever practicable,the Group finances its net investment in non US dollar subsidiaries primarilyby means of borrowings denominated in the appropriate currency. Otherstrategies, including the payment of dividends, are used to minimise the amountof net assets exposed to foreign currency revaluation.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 by using financialinstruments such as forward currency contracts. Changes in the forward contractfair values are booked through the income 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.

The Group's main foreign exchange risk relates to movements in the sterling/USdollar exchange rate. Movements in the sterling/US dollar rate impact thetranslation of sterling profit earned in the UK and the translation of sterlingdenominated net assets.If the average sterling/US dollar rate had been 10% higher during 2007,post-tax profit for the year would have been $2.4m higher (2006: $1.4m higher).If the average sterling/US dollar rate had been 10% lower during 2007, post-taxprofit for the year would have been $5.4m lower (2006: $0.9m lower). If theclosing sterling/US dollar rate was 10% higher or lower at 31 December 2007,exchange differences in equity would have been $10.9m (2006: $3.0m) higher

orlower respectively.(ii)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 into fixed rates to generate thedesired interest profile and to manage the Group's exposure to interest ratefluctuations. The Group's long-term policy is to maintain approximately 50% ofits borrowings at fixed rates of interest. At 31 December 2007, approximately44% (2006 : 51%) of the Group's borrowings were at fixed rates after takingaccount of interest rate swaps.The Group is also exposed to interest rate risk on cash held on deposit. TheGroup's policy is to maximise the return on cash deposits whilst ensuring thatcash is deposited with a financial institution with a credit rating of `AA' orbetter. If average interest rates had been 1% higher or lower during 2007,post-tax profit for the year would have been $1.5m higher or lower respectively(2006: $1.3m).(iii)Price risk

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

(b)Credit risk

The Group's credit risk primarily relates to its trade receivables. The Group'soperations comprise three divisions, Engineering & Production Facilities, WellSupport and Gas Turbine Services each made up of a number of businesses.Responsibility for managing credit risks lies within the businesses withsupport being provided by Group and divisional management where appropriate.A customer evaluation is typically obtained from an appropriate credit ratingagency. Where required, appropriate trade finance instruments such as lettersof credit, bonds, guarantees and credit insurance will be used to manage creditrisk.The Group's major customers are typically large companies which have strongcredit ratings assigned by international credit rating agencies. Where acustomer does not have sufficiently strong credit ratings, alternative forms ofsecurity such as the trade finance instruments referred to above may beobtained. The Group has a broad customer base and management believe that nofurther credit risk provision is required in excess of the provision forimpairment of trade receivables.Management review trade receivables across the Group based on receivable dayscalculations to assess performance. There is significant management focus onreceivables that are overdue. A table showing trade receivables and receivabledays by division is provided in note 13. Receivable days calculations are notprovided on non-trade receivables as management do not believe that thisinformation is relevant.The Group also has credit risk in relation to cash held on deposit. The Group'spolicy is to deposit cash at institutions with a `AA' rating or better wherepossible. 100% of cash held on deposit at 31 December 2007 (2006 : 100%) washeld with such institutions.

(c)Liquidity risk

With regard to liquidity, the Group's policy is to ensure continuity offunding. At 31 December 2007, 93% (2006 : 96%) of the Group's borrowingfacilities (excluding joint ventures) were due to mature in more than one year.Based on the current outlook the Group has sufficient funding in place to meetits future obligations.(d)Capital riskThe Group seeks to maintain an optimal capital structure. The Group monitorsits capital structure on the basis of its gearing ratio, interest cover and theratio of net debt to EBITDA.

Gearing is calculated by dividing net debt by shareholders' funds. Gearing at 31 December 2007 was 29% (2006: 32%).

Interest cover is calculated by dividing EBITA by net interest expense. Interest cover for the year to December 2007 was 12.6 times (2006: 9.0 times).

The ratio of net debt to EBITDA at 31 December 2007 was 0.7 (2006: 1.0).

The table below analyses the Group's financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period from the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

At 31 December 2007 Less than Between 1 Between 2 Over 5 1 year $m and 2 and 5 years $m years$m years $m Borrowings 45.1 - 349.9 -

Derivative financial instruments 1.5 0.4 0.8 -

Trade and other payables 891.6 - - - Other non-current liabilities - 15.0 54.5 25.8 At 31 December 2006 Borrowings 41.5 - 356.7 -

Derivative financial instruments 0.9 - 0.1 -

Trade and other payables 710.8 - - - Other non-current liabilities - 20.4 10.8 -

The table below analyses the Group's derivative financial instruments whichwill be settled on a gross basis into relevant maturity groupings based on theremaining period from the balance sheet date to the contractual maturity date.The amounts disclosed in the table are the contractual undiscounted cash flows.At 31 December 2007 Less than Between 1 Between 2 Over 5 1 year $m and 2 and 5 years $m years $m years $m

Forward foreign exchange contracts

Outflow 162.5 1.2 - - Inflow 163.1 1.2 - - Interest rate swaps Outflow 4.7 2.0 14.8 - Inflow 3.0 1.7 14.0 - At 31 December 2006

Forward foreign exchange contracts

Outflow 46.8 - - - Inflow 47.4 - - - Interest rate swaps Outflow 6.6 1.9 20.0 - Inflow 7.1 2.1 22.6 -

All of the Group's forward foreign exchange contracts are categorised as held for trading. All interest rate swaps are categorised as cash flow hedges.

Fair value of non-derivative financial assets and financial liabilities

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 and as a result, book value andfair value are considered to be the same. 2007 2006 Book Fair Book Fair Value Value Value Value $m $m $m $m

Fair value of long-term borrowings Long-term borrowings (note 16) (349.9) (349.9) (356.7) (356.7) Fair value of other financial assets and financial liabilities Primary financial instruments held or issued to finance the Group's operations:

Trade and other receivables (note 894.9 894.9 792.5 792.5 13)

Cash at bank and in hand (note 14) 98.8 98.8 85.8 85.8 Short-term deposits (note 14) 18.3 18.3 54.5 54.5 Trade and other payables (note 15) (891.6) (891.6) (710.8) (710.8) Short-term borrowings (note 16) (45.1) (45.1) (41.5) (41.5)

Other non-current liabilities (note (95.3) (95.3) (31.2) (31.2) 17)

Derivative financial instruments

The fair value of the Group's derivative financial instruments at the balancesheet date were as follows: 2007 2006 Assets Liabilities Assets Liabilities $m $m $m $m

Interest rate swaps - cash flow 0.8 1.6 3.0 0.3

hedges

Forward foreign exchange contracts 0.7 0.5 0.9 0.2

Currency options - 0.6 - 0.5 Total 1.5 2.7 3.9 1.0 Less non-current portion:

Interest rate swaps - cash flow 0.8 1.2 2.6 0.1

hedges Current portion 0.7 1.5 1.3 0.9 Trading derivatives are classified as a current asset or liability. The fullfair value of a hedging derivative is classified as a non-current asset orliability if the remaining maturity of the hedged item is more than 12 monthsand, as a current asset or liability if the maturity of the hedged item is lessthan 12 months.There was no ineffectiveness recognised in the income statement from fair valuehedges in the current or preceding year. The ineffective portion recognised inthe income statement arising from cash flow hedges amounts to $nil (2006:$0.4m). There was no ineffectiveness recorded in the income statement from netinvestment in foreign entity hedges in the current or preceding year.

The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet.

(a)Forward foreign exchange contracts

The notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2007 was $163.7m (2006: $46.8m).

(b)Interest rate swaps

The notional principal amount of the Group's outstanding interest rate swap contracts at 31 December 2007 was $175.0m (2006 : $203.9m).

At 31 December 2007 the fixed interest rates excluding margin varied from 2.7%to 5.2% (2006 : 2.7% to 5.2%) and the floating rate was 5.3% also excludingmargin (2006 : 5.4%). The Group interest rate swaps are for periods of up to 5years and they expire between 2008 and 2010. The bank has a break option on one$25m 5 year swap. This option is exercisable on a quarterly basis.

The fair value gains and losses relating to the interest rate swaps which are deferred in equity at 31 December 2007 will reverse in the income statement over the term of the swaps.

(c)Hedge of net investment in foreign entities

The table below shows the Group's foreign currency borrowings which it hasdesignated as a hedge of subsidiary company net assets. The fair value of theborrowings at 31 December 2007 was $158.4m (2006 : $137.5m). The foreignexchange loss of $7.6m (2006 : $14.3m) on translation of the borrowings into USdollars has been recognised in the currency translation reserve.2007 2006 Foreign $m % of foreign Foreign $m % of foreign currency currency net currency currency net amount assets amount assets hedged hedged ‚£35.0m 69.7 42% ‚£50.0m 97.9 76% C$63.0m 63.8 67% C$20.0m 17.2 41% A$5.6m 4.9 34% A$5.6m 4.4 24% ¢â€š¬13.7m 20.0 74% ¢â€š¬13.7m 18.0 82% 158.4 137.5 19 Provisions Warranty Other Total provisions $m $m $m At 1 January 2007 13.5 10.1 23.6 Exchange differences 0.3 - 0.3

Charge to income statement 12.1 12.3 24.4

Payments during the year (8.2) (3.4) (11.6) At 31 December 2007 17.7 19.0 36.7 Warranty provisionsThese provisions are recognised in respect of guarantees provided in the normalcourse of business relating to contract performance. They are based on previousclaims history and it is expected that most of these costs will be incurredover the next two years.

Other provisions

At 31 December 2007, other provisions of $19.0m (2006 : $10.1m) have beenrecognised. This amount includes provisions for future losses on onerouscontracts, a provision for non-recoverable indirect taxes and a provision forremedial work at one of our facilities. It is expected that the majority of thecosts in relation to these provisions will be incurred over the next two years.

20 Deferred tax

Deferred tax is calculated in full on temporary differences under the liabilitymethod using the tax rate applicable to the territory in which the asset orliability has arisen. Deferred tax in relation to UK companies is provided at28% (2006: 30%). The change in rate at 31 December 2007 has not had a materialimpact on the deferred tax balance.

The movement on the deferred tax account is shown below:

2007 2006 $m $m At 1 January (29.3) (12.3) Exchange differences (0.6) (1.2) Credit to income statement (16.4) (18.4)

Deferred tax relating to retirement benefit liabilities 0.8 2.6

At 31 December (45.5) (29.3)

Deferred tax is presented in the financial statements as

follows: Deferred tax assets (51.1) (36.6) Deferred tax liabilities 5.6 7.3 (45.5) (29.3) 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 $20.0m (2006 : $20.1m) would bepayable.

The Group has unrecognised tax losses of $39.8m (2006 : $44.3m) 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 Pension Share Short term Total tax based timing depreciation charges differences $m $m $m $m $m Deferred tax assets 5.8 (3.4) (8.8) (44.7) (51.1) Deferred tax - - - 5.6 5.6 liabilities Net deferred tax 5.8 (3.4) (8.8) (39.1) (45.5) liability/(asset) 21 Share based chargesThe Group currently has three share based payment schemes, the Executive ShareOption Scheme (`ESOS'), the Long Term Retention Plan (`LTRP') and the Long TermIncentive Scheme (`LTIS'). Details of each of the schemes are given in theDirectors' Remuneration Report and in note 22.

The charge in the Group income statement for these schemes is $13.7m (2006 : $9.7m)

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

ESOS and LTRP

At 31 December 2007 there were 618 employees (2006 : 490) participating inthese schemes. For the purposes of calculating the fair value of the options aBlack-Scholes option pricing model has been used. Based on past experience, ithas been assumed that options will be exercised, on average, six months afterthe earliest exercise date, which is four years after grant date, and therewill be a lapse rate of between 15% and 20%. The share price volatility used of35%-40% is based on the actual volatility of the Group's shares since IPO aswell as that of comparable companies. The risk free rate of return of 4.1%-5.2%is based on the implied yield available on zero coupon gilts with a termremaining equal to the expected lifetime of the options at the date of grant. Adividend yield of around 1.0% has been used in the calculations.The fair value of options granted under the ESOS during the year was ‚£0.91(2006 : ‚£0.87). The fair value of options granted under the LTRP during theyear ranged from ‚£2.54 to ‚£3.92 (2006 : ‚£2.25 to ‚£2.51). The weighted averageremaining contractual life of share options at 31 December 2007 is 5.7 years(2006: 6.0 years).LTISThe share based charge is calculated using a fair value of ‚£1.40. The chargefor the market related performance target has been calculated using a MonteCarlo simulation model using similar assumptions to the ESOS and LTRPcalculations. The LTIS is replaced by a new Long Term Incentive Plan (`LTIP')with effect from 1 January 2008.22 Share capital 2007 2006 Authorised $m $m

720,000,000 (2006: 720,000,000) ordinary shares 34.9 34.9

of 3¢â€¦â€œ pence 2007 2006 shares $m shares $m Issued and fully paid

Ordinary shares of 3¢â€¦â€œ pence each

At 1 January 516,632,930 25.5 515,237,930 25.4 Issue of new shares 203,790 - 375,000 -

Allocation of shares to employee 7,500,000 0.5 1,020,000 0.1

share trusts At 31 December 524,336,720 26.0 516,632,930 25.5

John Wood Group PLC is a public limited company, incorporated and domiciled in Scotland.

During the year 203,790 ordinary shares of 3¢â€¦â€œ pence were issued at pricesvarying from 15¢â€¦â€ pence per share to 83¢â€¦â€œ pence per share, on the exercise ofoptions 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:Year of Number of ordinary shares Exercise under option price Grant 2007 2006 (per Exercise share) period 1998 - 46,290 15¢â€¦â€p 2003-2008 2000 326,250 574,038 17¢â€¦â€œp 2005-2010 2001 315,000 645,000 93¢â€¦â€œp 2006-2011 2001 1,260,070 4,987,200 83¢â€¦â€œp 2006-2011 2002 327,000 1,651,500 83¢â€¦â€œp 2007-2012 2003 - 500,000 161‚¼p 2007-2013 2003 1,645,413 3,428,542 158p 2007-2013 2004 6,269,517 6,601,041 128‚½p 2008-2014 2005 1,807,917 1,917,292 145p 2009-2015 2006 919,667 1,019,000 265‚¼p 2010-2016 2007 1,215,500 - 268‚½p 2011-2017 14,086,334 21,369,903 Details 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.

3,873,733 options (2006 : 6,252,528) were exercisable at 31 December 2007. 1,282,500 options were granted during the year, 7,965,088 options were exercised during the year and 600,981 options lapsed during the year. The weighted average share price for options exercised during the year was ‚£3.27 (2006 : ‚£2.45).

There are no performance criteria attached to the exercise of the optionsgranted prior to 2003. Options granted to directors under the executive shareoption scheme adopted during 2002, and implemented in 2003, are subject toperformance criteria as set out in the Directors' Remuneration Report. Thereare 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 31December:Year of Number of ordinary Exercise shares under option price Grant 2007 2006 (per Exercise share) period 2003 390,520 1,688,056 3¢â€¦â€œp 2007-2008 2004 81,250 100,000 3¢â€¦â€œp 2008-2009 2005 121,502 138,003 3¢â€¦â€œp 2009-2010 2006 1,317,104 1,299,733 3¢â€¦â€œp 2010-2011 2007 1,684,938 - 3¢â€¦â€œp 2011-2012 3,595,314 3,225,792 Options are granted under the Group's LTRP at par value (3¢â€¦â€œ pence per share).There are no performance criteria attached to the exercise of options under theLTRP however, no LTRP options are granted unless the Group achieves a minimumlevel of EPS growth of RPI plus 3%. The level of grant varies between RPI plus3% and RPI plus 10%. 1,783,500 LTRP options were granted during the year,1,280,354 LTRP options were exercised during the year and 133,624 LTRP optionslapsed during the year. Further details on the LTRP are provided in theDirectors' 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 measures areoperating profit, return on capital employed and growth in the company's shareprice. The share price performance measure applies to the executive directorsonly. The awards are in the form of restricted shares and are deferred for twoyears from the award date. 6,863,251 shares are potentially issuable under thescheme. The LTIS is replaced by a new Long Term Incentive Plan (`LTIP') witheffect from 1 January 2008. Further details of the LTIS and LTIP are providedin the Directors' Remuneration Report.23 Share premium 2007 2006 $m $m At 1 January 294.1 292.1

Arising on issue of new shares, net of expenses 0.2 0.4 Allocation of shares to employee share trusts 9.3 1.6

At 31 December 303.6 294.1

Expenses of share issue and allocation amounted to $0.1m (2006 : $0.1m).

24 Retained earnings 2007 2006 $m $m At 1 January 397.4 288.1 Profit for the year attributable to equity shareholders 165.0 120.5 Dividends paid (27.6) (20.8)

Credit relating to share based charges 13.7 9.7 Actuarial gain on retirement benefit liabilities 2.6 8.5 Movement in deferred tax relating to retirement benefit (0.8) (2.6) liabilities Shares allocated to ESOP trusts (9.8)

(1.7)

Shares disposed of by ESOP trusts 16.2 1.4 Exchange differences in respect of shares held by ESOP trusts (0.8) (5.7) At 31 December 555.9 397.4 Retained earnings are stated after deducting the investment in own shares heldby ESOP trusts. Investment in own shares represents the cost of 19,518,329(2006 : 21,059,981) of the company's ordinary shares totalling $40.8m (2006 :$46.4m). No options have been granted over shares held by the ESOP trusts (2006: 46,290).Shares acquired by the ESOP trusts are purchased in the open market using fundsprovided by John Wood Group PLC to meet obligations under the Employee ShareOption Schemes, the LTRP and the LTIS. During 2007, 7,500,000 shares at a valueof $9.8m were allocated to the trusts in order to satisfy the exercise of shareoptions. 9,041,652 shares were issued during the year to satisfy the exerciseof share options at a value of $16.2m. Exchange adjustments of $0.8m aroseduring the year relating to the retranslation of the investment in own sharesfrom sterling to US dollars. The costs of funding and administering the trustsare charged to the income statement in the period to which they relate. Themarket value of the shares at 31 December 2007 was $168.2m (2006 : $108.0m)based on the closing share price of ‚£4.33 (2006 : ‚£2.62). The ESOP trusts havewaived their rights to receipt of dividends except in relation to those sharesused to meet obligations under the LTIS.25 Other reserves Capital Currency Hedging Total reduction translation reserve reserve reserve $m $m $m $m At 1 January 2006 88.1 (13.8) 1.4 75.7

Exchange differences on retranslation of - 5.6 - 5.6

foreign currency net assets

Tax on foreign exchange losses recorded - 3.2 - 3.2

in reserves Cash flow hedges - - 0.8 0.8 At 31 December 2006 88.1 (5.0) 2.2 85.3

Exchange differences on retranslation of - 7.0 - 7.0

foreign currency net assets

Tax on foreign exchange losses recorded - 0.3 - 0.3

in reserves Cash flow hedges - - (3.5) (3.5) At 31 December 2007 88.1 2.3 (1.3) 89.1

A capital redemption reserve was created on the conversion of convertible redeemable preference shares immediately prior to the Initial Public Offering 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 2007 2006 $m $m At 1 January 7.7 19.6 Acquisition of minority interest (0.2)

(11.1)

Investment by minority shareholders 1.4 -

Share of profit for the year 3.9 0.7 Dividends paid (1.5) (1.5) At 31 December 11.3 7.7

27 Cash generated from operations

2007 2006 $m $m

Reconciliation of operating profit to cash generated

from operations: Operating profit 285.2 207.5 Adjustments for: Depreciation 60.3 51.4 Gain on disposal of property plant and equipment (1.2)

(1.4)

Amortisation of other intangible assets 10.6 7.6

Share based charges 13.7 9.7

Impairment and restructuring charges - non-cash 25.0 -

impact

Profit on disposal of interest in joint venture (3.6) -

Increase in provisions 12.8 8.1

Changes in working capital (excluding effect of acquisition and disposal of subsidiaries)

Increase in inventories (112.7) (55.2) Increase in receivables (74.4) (125.6) Increase in payables 131.8 127.2 Exchange differences (8.5) (4.2) Cash generated from operations 339.0 225.1 Analysis of net debt At 1 Cash flow Exchange At 31 January movements December 2007 2007 $m $m $m $m Cash and cash equivalents 140.3 (27.5) 4.3 117.1 Short term borrowings (41.5) (0.2) (3.4) (45.1) Long term borrowings (356.7) 18.3 (11.5) (349.9) Net debt (257.9) (9.4) (10.6) (277.9) 28 AcquisitionsThe assets and liabilities acquired in respect of the acquisition during the year were as follows: Fair value $m Property plant and equipment 5.4 Other intangible assets 29.2 Trade and other receivables 20.1 Cash 4.6 Trade and other payables (16.7) Net assets acquired 42.6 Goodwill 144.1 Consideration 186.7 Consideration satisfied by: Cash 116.6 Deferred consideration 70.1 186.7 The Group has used acquisition accounting for the purchase and, in accordancewith the Group's accounting policies, the goodwill arising on consolidation of$144.1m has been capitalised. The amounts disclosed in the table above relateto the acquisition of IMV Projects Inc (`IMV'), which was acquired at the endof November 2007. The fair values in the above table are equivalent to the bookvalues with the exception of goodwill and other intangible assets.

The IMV acquisition provides the Group with access to new markets and strengthen the Group's capabilities in certain areas. IMV will be in a position to access the Group's wider client base and use the Group's existing relationships to further grow and develop their businesses. These factors contribute to the goodwill recognised by the Group on the acquisition.

Deferred consideration payments of $13.6m were made during the year in respectof acquisitions made in prior periods. Payments during the year and changes toprevious estimates of deferred consideration have resulted in additionalgoodwill of $2.4m.In January 2008, the Group acquired Producers Assistance Corporation (`PAC')for an initial consideration of $11.0m. PAC's net assets at the date ofacquisition were $1.4m. The purchase price allocation process was not finalisedprior to the completion of the financial statements.The outflow of cash and cash equivalents on the acquisition made during theyear is analysed as follows: $m Cash consideration 116.6 Cash acquired (4.6) 112.0

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

$m Revenue 4,519.6 Profit for the year 180.6 The acquired business earned cumulative revenue of $86.9m from the beginning ofthe year to the acquisition date. From the date of acquisition to 31 December2007, the acquisition contributed $7.9m to revenue and $0.7m to profit for

theyear.29 Employees and directorsEmployee benefits expense 2007 2006 $m $m Wages and salaries 1,467.1 1,155.8 Social security costs 111.4 89.4

Pension costs - defined benefit schemes (note 30) 6.5 7.1 Pension costs - defined contribution schemes (note 30) 33.0 23.7

1,618.0 1,276.0

Average monthly number of employees (including executive 2007 2006

directors) No. No. By geographical area: Europe 4,883 4,410 North America 9,632 8,430 Rest of the World 7,098 5,817 21,613 18,657 Key management compensation 2007 2006 $m $m

Salaries and short-term employee benefits 19.3 15.7 Amounts receivable under long-term incentive schemes 12.2 8.8

Post employment benefits 1.1 0.9 Share based charges 7.6 6.0 40.2 31.4

The key management figures given above include executive directors.

2007 2006 Directors $m $m Aggregate emoluments 6.6 5.6

Aggregate amounts receivable under long-term incentive 1.8 1.5

schemes

Aggregate gains made on the exercise of share options 2.3 1.4 Company contributions to defined contribution pension 0.1 0.1

schemes 10.8 8.6

One director (2006: one) has retirement benefits accruing under a defined contribution pension scheme. Retirement benefits are accruing to six (2006: six) 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 PLC Retirement Benefits Scheme, is a defined benefit scheme, which is contracted out of the State Scheme. The assets of the scheme are held separately from those of the Group, being invested with independent investment companies in trustee administered funds.

The most recent actuarial valuation of the scheme was carried out at 5 April2007 by a professionally qualified actuary. On 5 April 2007 there was a changeto the benefits provided under the scheme. From that date benefits arecalculated on a Career Averaged Revalued Earnings ("CARE") basis.The principal assumptions made by the actuaries at the balance sheet date were: 2007 2006 % %

Rate of increase in pensionable salaries 5.40 5.20 Rate of increase in pensions in payment and deferred 3.20 2.75

pensions Discount rate 5.60 5.20

Expected return on scheme assets 7.00 7.03

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 amounts recognised in the balance sheet are determined as follows:

2007 2006 $m $m Present value of funded obligations (187.5) (165.3) Fair value of scheme assets 176.2 140.4 Net liabilities (11.3) (24.9) The major categories of scheme assets as a percentage of total scheme assetsare as follows: 2007 2006 % % Equity securities 85.4 81.3 Corporate bonds 2.6 3.2 Gilts 11.2 9.7 Cash 0.8 5.8

The amounts recognised in the income statement are as follows:

2007 2006 $m $m

Current service cost included within employee benefits 6.5 7.1

expense Interest cost 8.9 7.3

Expected return on scheme assets (10.5) (8.1) Total included within finance income (1.6) (0.8)

The employee benefits expense is included within administrative expenses.

Changes in the present value of the defined benefit liability are as follows: 2007 2006 $m $m

Present value of funded obligations at 1 January 165.3 137.0

Current service cost 6.5 7.1 Interest cost 8.9 7.3 Actuarial losses/(gains) 7.9 (5.6)

Scheme participants contributions 3.3 3.5

Benefits paid (2.1) (3.7) Plan curtailment (5.0) - Exchange differences 2.7 19.7

Present value of funded obligations at 31 December 187.5 165.3

Changes in the fair value of scheme assets are as follows:

2007 2006 $m $m

Fair value of scheme assets at 1 January 140.4 103.7 Expected return on scheme assets 10.5 8.1

Contributions 14.6 13.6 Benefits paid (2.1) (3.7) Actuarial gains 10.5 2.9 Exchange differences 2.3 15.8

Fair value of scheme assets at 31 December 176.2 140.4

Analysis of the movement in the balance sheet liability:

2007 2006 $m $m At 1 January 24.9 33.3 Current service cost 6.5 7.1 Finance income (1.6) (0.8) Contributions (11.3) (10.1) Plan curtailment (5.0) -

Net actuarial gains recognised in the year (2.6) (8.5)

Exchange differences 0.4 3.9 At 31 December 11.3 24.9

Contributions include a one-off payment of $4m (‚£2m) made by the Group in April 2007 as part of the CARE transition arrangements.

Cumulative actuarial (gains) and losses recognised in equity:

2007 2006 $m $m At 1 January 27.0 35.5

Net actuarial gains recognised in the year (2.6) (8.5)

At 31 December 24.4 27.0

The actual return on scheme assets was $21.0m (2006 : $11.0m).

History of experience gains and losses:

2007 2006 2005 2004

2003

Difference between the expected and actual return on scheme assets :

Gain ($m) 10.5 2.9 12.3 4.9 6.3

Percentage of scheme assets 6% 2% 12% 6% 10% Experience (losses)/gains on scheme

liabilities: (Loss)/gain ($m) (7.9) 5.6 (14.8) (9.7) (7.5)

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

scheme liabilities Present value of scheme liabilities 187.5 165.3 137.0 122.2 93.0 ($m) Fair value of scheme assets ($m) 176.2 140.4 103.7 88.3 65.5 Deficit ($m) 11.3 24.9 33.3 33.9 27.5

The contributions expected to be paid during the financial year ending 31 December 2008 amount to $5.8m (‚£2.9m).

Pension costs for defined contribution schemes are as follows:

2007 2006 $m $m Defined contribution schemes 33.0 23.7

Contributions outstanding at 31 December 2007 in respect of defined contribution schemes amounted to $15.0m (2006 : $11.4m).

31 Operating lease commitments - minimum lease payments

Property 2007 Property 2006 Vehicles, Vehicles, plant and plant and equipment equipment $m $m $m $m

Amounts payable under non-cancellable

operating leases due: Within one year 27.7 13.3 19.5 10.5

Later than one year and less than five 79.9 14.5 58.5 13.0

years After five years 103.0 0.7 56.3 0.1 210.6 28.5 134.3 23.6 The Group leases various offices and warehouses under non-cancellable operatinglease agreements. The leases have various terms, escalation clauses and renewalrights. The Group also leases plant and machinery under non-cancellableoperating lease agreements. The 2006 figures have been restated in accordancewith IFRS.

32 Contingent liabilities

At the balance sheet date the Group had cross guarantees without limit extendedto its principal bankers in respect of sums advanced to subsidiaries. At 31December 2007, the Group has outstanding guarantees of $1.7m (2006 : $9.1m) inrespect of joint venture banking arrangements.

33 Capital and other financial commitments

2007 2006 $m $m

Contracts placed for future capital expenditure not provided 7.1 3.4 in the financial statements The capital expenditure above relates to property plant and equipment. Thereare no significant joint venture capital commitments included in the figuresabove.34 Related party transactionsThe 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. 2007 2006 $m $m

Sale of goods and services to joint ventures 143.5 120.7 Purchase of goods and services from joint ventures 16.5 6.8 Receivables from joint ventures 14.7 20.9

Payables to joint ventures 10.5 3.2

In addition to the above, the Group charged JW Holdings Limited, a company in which Sir Ian Wood holds a controlling interest, an amount of $0.1m (2006 : $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.

Name of subsidiary or joint Country of Ownership Principal activity venture incorporation interest % or registration Engineering & Production Facilities:

Mustang Engineering Holdings, USA 100 Engineering, project

and Inc construction

Global Performance Holdings, USA 100 management, refinery

Inc upgrades and Alliance Wood Group USA 100 operational enhancement. Engineering L.P

J P Kenny Engineering Limited UK 100

IMV Projects Inc Canada 100 Wood Group Engineering (North UK 100 Brownfield engineering andSea) Limited modifications, SIGMA 3 (North Sea) Limited UK 33.3* production enhancement, operations Wood Group Production USA 100 management, maintenance Services, Inc management Wood Group Colombia S.A Colombia 100 and abandonment services.

Wood Group Equatorial Guinea Cyprus 100

Limited Well Support: Wood Group ESP, Inc. USA 100 Electric submersible pumps Corporacion ESP de Venezuela Venezuela 100 Electric submersible pumpsCA Wood Group Products & Argentina 100 Electric submersible pumpsServices SA Wood Group ESP (Middle East) Cyprus 100 Electric submersible pumpsLtd

Wood Group Pressure Control, USA 100 Valves and wellhead

L.P. equipment

Wood Group Pressure Control UK 100 Valves and wellhead

Limited equipment

Wood Group Logging Services USA 100 Logging services

Inc.

Copgo Wood Group Argentina Argentina 100 Logging services

S.A Gas Turbine Services: Wood Group Light Industrial UK 100 Gas turbine repair and Turbines Limited overhaul Wood Group Engineering Jersey 100 Gas turbine repair and Services (Middle East) overhaul Limited Rolls Wood Group (Repair & UK 50* Gas turbine repair and Overhauls)Limited overhaul TransCanada Turbines Limited Canada 50* Gas turbine repair and overhaul Wood Group Advanced Parts Switzerland 100 Provision of gas turbine Manufacture AG parts Wood Group Gas Turbine UK 100 Gas turbine repair and Services Limited overhaul Wood Group Field Services, USA 100 Gas turbine repair and Inc. overhaul Wood Group Power Solutions, USA 100 Provision of gas turbine Inc. packages Wood Group Pratt & Whitney USA 49* Gas turbine repair and Industrial Turbine Services, overhaul

LLC Wood Group Power Operations, USA 100 Power plant operations andInc 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's AutomatedClearing Services) system. The benefit of the BACS payment method is that theRegistrars post the tax vouchers directly to the shareholders, whilst thedividend is credited on the payment date to the shareholder's Bank or BuildingSociety account. UK shareholders who have not yet arranged for their dividendsto be paid direct to their Bank or Building Society account and wish to benefitfrom this service should contact the Registrars at the address below. Sterlingdividends will be translated at the closing mid-point spot rate on 21 March2008 as published in the Financial Times on 22 March 2008.

Officers and advisers

Secretary and Registered OfficeI JohnsonJohn Wood Group PLCJohn Wood HouseGreenwell RoadABERDEENAB12 3AXTel: 01224 851000RegistrarsEquiniti LimitedPO Box 28448Finance HouseOrchard BraeEDINBURGHEH4 1WQTel: 0870 601 5366StockbrokersJPMorgan Cazenove LimitedCredit SuisseAuditorsPricewaterhouseCoopers LLPChartered AccountantsFinancial calendarResults announced 04 March 2008 Ex-dividend date 19 March 2008 Dividend record date 21 March 2008 Annual General Meeting 22 May 2008 Dividend payment date 26 May 2008

The Group's Investor Relations website can be accessed at www.woodgroup.com.

EBITA represents operating profit of $285.2m (2006: $207.5m) for 2007 beforeadjusting for profit on disposal of interest in joint venture of $3.6m (2006:nil), impairment and restructuring charges of $26.2m (2006: nil) andamortisation of $10.6m (2006: $7.6m). This financial term is provided as it isa key unit of measurement used by the Group in the management of its business.Shares held by the group's employee share ownership trusts are excluded fromthe number of shares in calculating earnings per ordinary share. Adjusteddiluted earning per ordinary share is based on the diluted number of shares,taking account of share options where the effect of these is dilutive. Adjusteddiluted earnings per ordinary share is calculated on earnings beforeamortisation, impairment and restructuring charges and profit on disposal ofinterest in joint venture, net of tax.

Number of employees and contractors at 31 December 2007

Duty holder has a particular meaning in the UK. The duty holder assumesresponsibility as operator for full regulatory compliance. Generally thiscovers full responsibility for establishment of a suitable safely case for eachinstallation, prevention of fire, explosion and emergency response, pipelineworks, work equipment regulations, lifting operations and control of substances

Gearing is net debt divided by total shareholders' equity

Interest cover is EBITA divided by net finance costs

Operating Capital Employed to Revenue is Operating Capital Employed (property,plant and equipment, intangible assets (excluding intangibles recognised onacquisition), inventory and trade and other receivables less trade and otherpayables) divided by Revenue.

Return on Capital Employed is EBITA divided by average equity plus average net debt and excludes discontinuing activities

WOOD GROUP (JOHN) PLC

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Related Shares:

Wood Group (J)