Full year results for the year ended 31 December 2015

23 Feb 2016

Full year results for the year ended 31 December 2015

Performance demonstrates resilience and flexibility in challenging markets

“Against a backdrop of significantly reduced customer activity, the Group delivered EBITA of $470m in line with expectations and 14.5% lower than 2014. Our continued actions to reduce costs, improve efficiency and broaden our service offering through organic initiatives and strategic acquisitions, position us as a strong and balanced business in both the current environment and for when market conditions recover.” - Robin Watson, Chief Executive

Financial Summary 2015     2014       %

$m      $m Change

Total Revenue1 5,852.4 7,616.4 (23.2)%

Total EBITA1 469.7   549.6 (14.5)%

EBITA Margin 8.0%    7.2%  0.8pts

Revenue from continuing operations on an equity 5,000.6 6,574.1 (23.9)%

accounting basis

Profit from continuing operations before tax and           320.2   414.5 (22.8)%

exceptional items (after tax on JV profits) on an equity

accounting basis

Profit from continuing operations before tax after         138.6 475.1 (70.8)%

exceptional items (after tax on JV profits) on an equity

accounting basis

Adjusted diluted EPS 84.0c   99.6c (15.7)%

Total Dividend 30.3c   27.5c   10.2%

Headlines

-- Relatively resilient performance. EBITA of $470m in line with

expectations; 14.5% lower than 2014

-- Management focus on operational utilisation

-- Delivered overhead cost savings of $148m which will sustain into 2016

-- Underlying headcount reduced by over 8,000 people (c. 20%)

-- Continued progress on strategic acquisitions including expansion into

the US brownfield petrochemical market. Total cash expenditure on new

acquisitions of $234m

-- Engineering - Impact of Upstream and Subsea project deferrals and

cancellation partly offset by growth in Downstream and robust

performance in Onshore Pipelines

-- PSN Production Services - North Sea impacted by reduction in project and

non-essential maintenance work and operator efficiency initiatives. US

onshore impacted by significant pressure on volumes and pricing

following strong 2014

-- PSN Turbine Activities - Previously indicated exceptional non-cash

impairment of EthosEnergy of $159m

-- Strong balance sheet and cash generation. Net debt of $290m (0.5x 2015

EBITDA) and cash conversion of 119%

-- Dividend up 10%. Dividend cover of 2.8 times.  Intention remains to

increase the dividend for 2016 by a double digit percentage.

Notes:

1. Total Revenue and Total EBITA include the contribution from joint ventures

and, in 2014, activities classified as discontinued. Total EBITA represents

operating profit including JVs on a proportional basis before the deduction

of amortization and net exceptional expense and is provided as it is a key

unit of measurement used by the Group in the management of its

business. See further detailed footnotes following the Financial Review.

Enquiries:

Wood Group

Andrew Rose - Group Head of Investor Relations

Laura McCracken - Investor Relations Manager

Carolyn Smith - Group Head of Communications +44 1224 851 000

Brunswick

Patrick Handley

Charles Pemberton +44 20 7404 5959

There will be an analyst and investor presentation at 60 Victoria Embankment, London, EC4Y 0JP at 09.00. Early registration is advised from 08.30.

A live webcast of the presentation will be available from www.woodgroup.com/investors. Replay facilities will be available later in the day.

Chair’s statement

Introduction

During 2015, the Board focused on supporting the executive leadership team in its response to a tough trading environment. Overall, the Group performed in line with expectations, benefitting from the flexibility of an asset-light model and the delivery of significant and sustainable overhead cost savings, while continuing to invest in strategic acquisitions and organic growth.

Markets

Conditions in oil & gas markets became increasingly challenging in 2015. During the year, oil prices fell by around a further 30% and E&P capital expenditure was down approximately 20%. The expectation of a lower-for-longer commodity price environment has prompted many global E&P customers to reassess capex and opex spending plans. Industry commentators are anticipating further spending reductions in 2016, which would represent the first consecutive annual declines in spending in more than 20 years. In other markets we have seen more resilient demand for our services.

Dividend

The Board has recommended a final dividend of 20.5 cents per share, which makes a total distribution for the year of 30.3 cents, an increase of 10% in line with previously stated intentions. The dividend cover ratio was 2.8 times (2015: 3.6 times). There is no change to our dividend approach, and our intention is to increase the dividend per share for 2016 by a double digit percentage. 

Executive Board Changes

As planned, following the AGM in May, David Kemp assumed the role of Group CFO following an interim period as deputy CFO.  David has been with the Group since 2013 in the position of Wood Group PSN CFO.  David succeeded Alan Semple who retired from Wood Group on 13 May 2015, following 15 years in the CFO role.  Alan was an excellent financial leader of the Group and the Board, and we are grateful for his noteworthy contribution.   

In October, we announced the appointment of Robin Watson as Chief Executive, effective 1 January 2016. Robin has been with the Group since 2010 and has served on the Board since 2013, initially as CEO of Wood Group PSN and then, since April 2015, as Group COO. Robin succeeds Bob Keiller who retired from Wood Group on 31 December 2015. I would like to thank Bob for his significant contribution to the Group, both following the acquisition of PSN in 2011, and during his three years as CEO.  Robin was identified as the stand-out candidate to succeed Bob as part of our succession planning process, and his appointment will ensure important continuity for our people and customers.

Wood Group is well placed to develop further its offering of technical solutions and I look forward to the Group’s continued success under the leadership and direction of Robin and his executive leadership team.

Ian Marchant, Chair

Chief Executive Review

2015    2014       %

$m      $m  Change

Total Revenue1 5,852.4 7,616.4 (23.2)%

Total EBITA1 469.7   549.6 (14.5)%

EBITA Margin 8.0%    7.2%  0.8pts

Revenue from continuing operations on an equity 5,000.6 6,574.1 (23.9)%

accounting basis

Profit from continuing operations before tax and           320.2   414.5 (22.8)%

exceptional items (after tax on JV profits) on an equity

accounting basis

Basic EPS 21.4c   87.9c (75.7)%

Adjusted diluted EPS2 84.0c   99.6c (15.7)%

Total Dividend 30.3c   27.5c   10.2%

ROCE5 16.3%   17.7%  (1.4)%

Note: The commentary on trading performance is presented based on proportionally consolidated numbers, which is the basis used by management to run the business. Total Revenue and Total EBITA include the contribution from joint ventures and, in 2014, activities classified as discontinued.

Wood Group is a company with a rich heritage of providing smart, technical solutions that create and sustain value for customers.  My initial objectives are simple: to ensure our business is appropriately structured to improve delivery to customers; to continue to generate cost savings; to develop our best talent; to continue to invest both organically and through acquisition; and create value for shareholders.

During 2015, in my role as COO, we faced a very challenging macro environment. Our principal focus was on controlling what we could control; we worked with customers to develop efficient solutions, stayed focused on managing our utilisation and ensuring the delivery of significant and sustainable overhead cost savings of $148m.  Challenging conditions prevailed throughout the year and we had to make some tough decisions which had a direct and significant impact on our people.  Our underlying headcount is down by over 8,000 people (20%) compared to December 2014.

These initiatives contributed to our relatively resilient financial performance in 2015, despite a 23% fall in revenues. Against a backdrop of significantly reduced activity across the oil services sector, the Group delivered EBITA of $470m in line with expectations, down 14.5% on 2014. Adjusted EPS of 84.0c was down 16%. EBITA margins rose by 0.8%.  The delivery of overhead cost savings and strict management of utilisation in the face of reduced volumes and pricing pressure was supplemented by one-off credits in the first half. These related to the successful conclusion of downstream projects in Engineering, and the release of a provision for deferred consideration relating to a previously completed US onshore acquisition in Wood Group PSN.

We maintained our strong focus on strategic M&A in 2015 and, as anticipated, the environment for completing acquisitions improved in the second half. Following the earlier acquisitions of Automated Technology Group and Beta Machinery Analysis, in December we acquired Infinity, creating a brownfield service offering to the buoyant US petrochemical market, and Kelchner, enhancing our US onshore footprint by adding exposure to the Marcellus gas basin as well as midstream and industrial markets. Total cash expenditure on new acquisitions in 2015 was $234m.

We continued to invest in our business, with $83m capex spent in the year on plant & infrastructure, design software and investment in ERP systems which has allowed us to consolidate and simplify our back office processes to improve service and reduce cost.

The Group continues to benefit from a strong balance sheet and we are comfortable with the flexibility, diversity and maturity of our funding following the extension earlier this year of our $950m bilateral facilities to 2020. Cash flow generation was strong in 2015, and net debt at the year-end was $290m, at the lower end of our typical range of 0.5 times to 1.5 times EBITDA. Cash conversion was 119%, calculated as post working capital cash flow divided by EBITDA.  Our solid funding position facilitates productive reinvestment in our business.  Organic investment and M&A remain our preferred uses of cash. There is no change to our dividend approach, and our intention is to increase the dividend per share for the full year 2016 by a double digit percentage in line with the increase in 2015. 

Outlook

The challenging market conditions in the second half of 2015 have continued in the first quarter of 2016. Further spending reductions by customers will require continued focus on the controllable elements of our business. Our continued actions to reduce costs, improve efficiency and broaden our service offering through organic initiatives and strategic acquisitions, position us as a strong and balanced business in the current environment and when market conditions recover.

Robin Watson, Chief Executive

Wood Group Engineering

Through Wood Group Mustang and Wood Group Kenny, we provide a range of specialist engineering services including conceptual studies, engineering, project & construction management (EPCM); and control systems upgrades to the upstream, subsea & pipeline, downstream, chemical process automation & industrial and clean energy sectors.

2015    2014 %

$m      $m Change

Revenue      1,728.6 2,130.7 (18.9)%

EBITA          214.7   232.0 (7.5)%

EBITA margin   12.4%   10.9% 1.5pts

People3        8,900 11,200 (20.5)%

In Wood Group Engineering, revenue decreased by 19%, with significant falls in activity in Upstream and Subsea due to project deferrals and cancellations. This was partly offset by growth in downstream, process and industrial and robust performance in onshore pipelines.  EBITA decreased by 7.5% however EBITA margin increased by 1.5pts to 12.4%. This reflected our focus on utilisation, overhead cost reduction initiatives, margin improvement in onshore pipelines and downstream and the successful completion of lump sum projects in downstream, process and industrial.

Our Upstream business accounted for around 35% of Engineering revenue. Throughout the year, we remained active on the Det Norske Ivar Aasen and Hess Stampede projects and will continue to provide operating support services into 2016, albeit diminishing through the year.  We secured a number of longer-term contracts in the year including our six year Offshore Maintain Potential Programme contract with Saudi Aramco in June on which we have commenced work, and our six year c. $400m maintenance and modifications contract with Statoil in Norway.  The market for new awards, particularly detailed design scopes, has been subdued as customers limit their capital expenditure, however we remain confident that early stage work is a good indicator of future activity.  We are well positioned to continue to the detailed design phase following successful FEED work on Peregrino Phase II and Tengizchevroil.

Subsea & pipelines represented around 40% of Engineering revenue.  We continued our activity on larger projects such as BP Shah Deniz and Quad 204, Tullow TEN and Chevron Gorgon, and won FEED work with Woodside and Shell on Browse, and Talisman in Vietnam.  We continue to benefit from our long term customer relationships, securing a five year contract with BP in October covering Norway, Gulf of Mexico and the Azerbaijan region and progressing to detailed design on the Greater Western Flank II for Woodside in Australia after the successful completion of the FEED work.  Our US onshore pipelines business has performed robustly as customers look to improve transportation to downstream facilities, with activity on the ETC Dakota access pipeline expected to continue throughout 2016.  The acquisition of Beta Machinery in June further strengthened the breadth of our services, specifically our integrity management capabilities which have been reinforced by the expansion of Beta into the UK.

Downstream, process & industrial activities accounted for around 25% of revenue. Following the successful completion of the front-end design of the Flint Hills refinery modification, we are progressing with the detailed engineering work which will continue throughout 2016.  In September, we acquired UK-based Automated Technology Group, an independent provider of control and power solutions for industrial automation.  ATG will complement our process automation capabilities which are currently centred in the US, and we started this expansion with the opening of an operation in Slovakia in December.

Outlook

The breadth and diversity of our Engineering business will continue to benefit us and we enter 2016 with backlog in a similar position to the previous year. Although there remains a lack of visibility of significant Upstream and Subsea projects, recent awards evidence continued customer support for our differentiated service offering. We remain well positioned to provide engineering project solutions to our balanced portfolio of clients, as they manage themselves through a prolonged period of challenging market conditions.

Wood Group PSN

Production Services

We provide services to the upstream, midstream, downstream and industrial sectors through brownfield engineering and modifications, production enhancement, operations and maintenance, facility construction and maintenance management, industrial services, training, and decommissioning services.

2015    2014 %

$m      $m Change

Revenue      3,447.8 4,636.0 (25.6)%

EBITA          258.0   341.7 (24.5)%

EBITA margin    7.5%    7.4% 0.1pts

People        23,900 26,600 (10.2)%

In Wood Group PSN Production Services, revenue decreased by 26% and EBITA decreased by 25%. This decrease in turnover predominantly reflects lower activity in the North Sea and the Americas. Activity in other international markets remained relatively robust.  EBITA margin was steady year-on-year, as utilisation management, significant overhead cost savings and the release of deferred consideration provisions helped to offset pricing pressure from customers and foreign exchange headwinds.  Excluding the impact of businesses acquired in 2015, headcount was down by around 6,000 people (22%).

The Americas accounted for around 40% of Production Services’ revenue. Following a strong performance in 2014, our US onshore business was impacted by significant pressure on volumes and pricing in 2015.  The pressure was most pronounced on our well site activities which are highly correlated to the decline in the rig count, with our infrastructure development and production related operations & maintenance activities being less affected. The acquisition of Kelchner, a provider of midstream and upstream construction and energy field services, in December, provides the Group with greater access to the Marcellus and Utica basins. This broadens our exposure for the longer term opportunity in US shale. The acquisition of Infinity Group for an initial consideration of $155m was completed in December 2015, further broadening our US service offering. The Infinity Group is an industrial construction and maintenance provider to the petrochemical, refining and gas processing sectors based in the US Gulf Coast.  This establishes a strong brownfield service offering in the petrochemical market which we believe offers attractive growth opportunities.

The North Sea business represented just below 40% of revenue, with volumes under longer term contracts impacted by the reduction in project and non-essential maintenance work and efficiency initiatives, including updates to processes and changes in offshore rotation patterns.  We continue to secure contracts with our long standing customer base including Total, Enquest and Chevron.  Our industrial services business, established with the acquisition of Pyeroy in 2013, is performing well and has benefitted from several new contracts with existing and new customers. In December, we also commenced work on a new duty holder contract with Antin Infrastructure Partners operating the CATS pipeline and terminal.  We remain fully aligned with customers looking to improve efficiency and we believe our record of cost leadership will be key as we address the operational challenges our customers are facing in this tough environment.  In 2016, we have again revisited North Sea contractor rates resulting in the reduction of rates for over a third of our 600 contractors.

Performance in our international business has been robust, with increased activity in the Middle East offsetting lower performance in Africa.  We have secured and commenced work on a number of important contracts over a wide geographical spread.  We continued to increase our presence in the Middle East with the award of a three year contract in Iraq and moved further into the Caspian region with a 3 year contract for NCOC in Kazakhstan.  Contracts in Australia and Papua New Guinea are progressing well and, in December, we were awarded a brownfield engineering contract with Conoco in Australia, including work on the Darwin LNG plant.  Developing our relationships built in the US and North Sea, we are progressing with our work for Shell on the five year Gabon contract which was awarded in August and, in Brazil, we have commenced work with Statoil in the Peregrino field.

Outlook

Market conditions remain very challenging, particularly in our core onshore US and North Sea markets. Elsewhere, we continue to be encouraged by good opportunities internationally and we will benefit from a good contribution from the completed acquisitions of Infinity and Kelchner.

Turbine Activities

Through three joint venture arrangements, we provide industrial gas turbine and rotating equipment repair, maintenance, overhaul and power plant EPC services to the oil & gas and power sectors.

2015   2014 %

$m     $m Change

Turbine JVs        676.0  818.6 (17.4)%

Legacy EPC             -   31.1 n/m

Total Revenue      676.0  849.7 (20.4)%

Turbine JVs         44.2   44.7 (1.1)%

Legacy EPC             - (11.4)     n/m

Total EBITA         44.2   33.3 32.7%

Total EBITA Margin  6.5%   3.9% 2.6pts

Our Turbine Activities consist of: two joint ventures with Siemens, EthosEnergy and RWG, and our joint venture with TransCanada, TransCanada Turbines (TCT) (together “Turbine JVs”).  Turbine Activities also included Wood Group GTS EPC contracts in 2014.

In Turbine JVs, revenue fell 17% and EBITA fell 1.3%.  Poor performance in in EthosEnergy, which saw a reduction in major maintenance and low equipment sales, was offset by improved performance in RWG and TCT.  As noted in December 2015, we have revised our expectations of near term performance in EthosEnergy and this has resulted in a non-cash impairment of the carrying value of our investment in EthosEnergy of $159m.

Outlook

In our turbine activities servicing the oil & gas markets we are focused on delivering efficiencies to support our customers and protect performance.  On the power side, we are looking to drive performance with a continued focus on cost and efficiency.

Financial Review

Trading performance

Trading performance is presented based on proportionally consolidated numbers, which is the basis used by management to run the business.  Total Revenue and Total EBITA include the contribution from joint ventures and activities classified as discontinued.  A reconciliation to statutory measures of revenue and operating profit from continuing operations excluding joint ventures is included in note 1 to the financial statements.  

Full Year Full Year

2015      2014

$m        $m

Total Revenue 5,852.4   7,616.4

Total EBITA 469.7     549.6

EBITA margin % 8.0%      7.2%

Amortisation - software and system development (54.8)    (40.2)

Amortisation - intangible assets from acquisitions (54.2)    (61.0)

EBIT                                                        360.7     448.4

Net finance expense (23.1)    (24.2)

Profit before tax and exceptional items                     337.6     424.2

Taxation before exceptional items                          (88.4)   (115.5)

Profit before exceptional items                             249.2     308.7

Exceptional items, net of tax - EthosEnergy impairment (159.1)         -

Exceptional items, net of tax - other                           -      27.6

Profit for the year 90.1     336.3

Basic EPS (cents) 21.4c     87.9c

Adjusted diluted EPS (cents)                                84.0c     99.6c

The review of our trading performance is contained within the Chief Executive Review. 

Reconciliation of Total EBITA to operating profit per accounts

The table below sets out a reconciliation of Total EBITA to operating profit per the Group income statement before exceptional items. Operating profit on a post exceptional basis by segment is included in note 1 to the financial statements.

2015    2014

$m      $m

EBITA 469.7   549.6

Amortisation (109.0) (101.2)

EBIT 360.7   448.4

Tax and interest charges on joint ventures included within

operating profit but not in EBITA                            (19.7)  (15.9)

Operating profit from discontinued activities                     -     4.3

Operating profit before exceptional items per accounts

341.0   436.8

Financial performance

The financial performance of the Group, adjusting for acquisitions and on a constant currency basis, is shown below. The 2014 results have been restated to include the results of acquisitions made in 2014 (Meesters, Cape, Sunstone, Agility and Swaggarts) as if they had been acquired on 1 January 2014 and also to apply the average exchange rates used to translate the 2015 results.  The 2015 results have been restated to exclude the results of acquisitions made in 2015 since the date of acquisition (Beta, ATG, Infinity and Kelchner).

2015   2015    2014 2014

Total  Total   Total Total

Revenue  EBITA Revenue  EBITA

$m     $m      $m $m

Wood Group Engineering 1,707.4  211.3 2,149.3  230.2

Wood Group PSN - Production Services 3,447.8 258.0 4,442.1  339.5

Wood Group PSN - Turbine Activities 676.0   44.2   810.8 30.7

Central costs                              - (47.2)       - (55.9)

Pro forma 5,831.2  466.3 7,402.2  544.5

Acquisitions                            21.2    3.4 (203.7) (20.2)

Constant currency                          -      - 417.9   25.3

Total Revenue and EBITA as reported 5,852.4  469.7 7,616.4  549.6

Amortisation

The amortisation charge for 2015 of $109.0m (2014: $101.2m) includes $54.2m (2014: $61.0m) of amortisation relating to intangible assets arising from acquisitions. Of this amount, $18.4m (2014: $27.7m) is in respect of the PSN acquisition and $21.4m (2014: $21.4m) relates to the acquisitions of Elkhorn and Mitchells. Amortisation in respect of software and development costs was $54.8m (2014: $40.2m) with the increase relating to the investment in ERP system development, engineering software and the impact of acquired businesses. Included in the amortisation charge for the year above is $1.9m (2014: $2.3m) in respect of joint ventures.  

Net finance expense

Net finance expense is analysed further below.

Full year Full year

2015      2014

$m        $m

Interest on debt 4.3       9.3

Bank fees and charges 8.6      11.6

Interest on US Private Placement debt 14.1       4.7

Total finance expense 27.0      25.6

Finance income (3.9)     (1.4)

Net finance expense 23.1      24.2

Interest cover⁴ was 20.3 times (2014: 22.7 times). Interest on debt resulted from lower average debt levels during the year. Interest on US Private Placement debt issued in the second half of 2014 represents a full 12 months of cost in 2015. Included in the above are net finance charges of $2.3m (2014: $1.9m) in respect of joint ventures.

Exceptional expense/(income)

Full Year Full year

2015      2014

$m        $m

EthosEnergy impairment 159.1         -

Integration and restructuring charges 36.6       7.5

Onerous contract (14.1)     (9.7)

Gain on divestment of Well Support division (10.4)         -

Venezuela settlement -    (58.4)

Transaction related costs -      23.0

Total exceptional items pre-tax 171.2    (37.6)

Tax on exceptional items (12.1)      10.0

Total exceptional items, net of tax 159.1    (27.6)

At 31 December 2015, the Group carried out an impairment review of its investment in the EthosEnergy joint venture. The recoverable amount of the investment of $192.2m is lower than the book value and therefore an impairment charge of $137.2m has been booked in the income statement. In addition, the Group has impaired its receivables by $9.3m in relation to a balance due by EthosEnergy and EthosEnergy has recorded an impairment charge of $12.6m relating to operations which it intends to divest or close during 2016.

In response to the lower oil price environment, the Group has taken action to reduce its cost base, including the restructuring of its business units to improve operational efficiency. In addition, a review of the Group’s property portfolio has identified onerous property leases in certain locations.  In total, $36.6m of redundancy and onerous lease costs have been incurred and expensed in the income statement in 2015 of which $24.1m relate to redundancy and $12.5m relate to onerous lease costs.

In 2013, the Group made an onerous contract provision in respect of Wood Group PSN’s contract in Oman. During 2015, the contract was successfully transitioned and closed out and the remaining provision of $14.1m was written back to the income statement at the end of the year.

A tax credit of $9.0m has been recorded in respect of the exceptional items included in continuing operations.

In 2011, the Group made provisions in respect of the disposal of its Well Support business. These provisions have been reassessed at 31 December 2015 with $10.4m of the provision being released to the income statement and credited to exceptional items. A tax provision was also made in 2011 in relation to the disposal. This has also been reassessed at 31 December 2015 and $3.1m has been released to the income statement.

Taxation

The effective tax rate on profit before tax and exceptional items including joint ventures and discontinued operations on a proportionally consolidated basis is set out below. 

Full year Full year

2015      2014

$m        $m

Profit from continuing operations before tax (pre-exceptional items)      337.6 424.2

Tax charge (pre-exceptional items) 88.4     115.5

Effective tax rate on continuing operations (pre-exceptional items)       26.2% 27.2%

The tax charge above includes $17.4m in relation to joint ventures (2014: $14.0m).  We expect the 2016 effective tax rate to remain around 26%.  

The Group’s tax liabilities include $112.7m relating to uncertain tax positions where management has had to exercise judgement in determining the most likely outcome in respect of the relevant issue.  The amount includes tax payable in relation to divestments and amounts provided in relation to recoverability of withholding tax and utilisation of tax losses.

Earnings per share

Adjusted diluted EPS for the year was 84.0 cents per share (2014: 99.6 cents). The average number of fully diluted shares used in the EPS calculation for the period was 379.3m (2014: 375.2m). 

Adjusted diluted EPS adds back all amortisation.  If only the amortisation related to intangible assets arising on acquisition is adjusted and no adjustment is made for that relating to software and development costs, the figure for 2015 would be 73.3 cents per share (2014: 91.8 cents).   

Dividend

The Board is recommending a final dividend of 20.5 cents per share, which, when added to the interim dividend of 9.8 cents per share, makes a total distribution for the year of 30.3 cents per share (2014: 27.5 cents), an increase of 10%. The dividend is covered 2.8 times (2014: 3.6 times) by adjusted earnings per share.  

Cash flow and net debt

The cash flow and net debt position below has been prepared using equity accounting for joint ventures, and as such does not proportionally consolidate the assets and liabilities of joint ventures.   The gross and net debt figures including joint ventures are given below.

Full year Full year

2015      2014

$m        $m

Opening net debt (excluding JVs) (326.6)   (325.3)

Cash generated from operations pre working capital (excluding JVs)

503.7     650.9

Working capital movements (excluding JVs)

59.2   (106.0)

Cash generated from operations                                          562.9     544.9

Acquisitions (238.0)   (262.9)

Capex and intangibles (82.6)   (110.2)

Tax paid                                                               (96.6)    (84.9)

Interest, dividends and other (113.0)    (88.2)

Decrease/(increase) in net debt 32.7     (1.3)

Closing net debt (excluding JVs) (293.9)   (326.6)

JV net cash 3.6      30.9

Closing net debt (including JVs) (290.3)   (295.7)

Throughout the period, the Group’s debt levels (including JV cash and debt) are set out below.  

Full Year Full Year

2015      2014

$m        $m

Average net debt        257.4     416.4

Average gross debt      572.1     643.4

Closing net debt        290.3     295.7

Closing gross debt      565.7     559.3

Cash generated from operations pre-working capital decreased by $147.2m to $503.7m and post-working capital increased by $18m to $562.9m.

The working capital inflow of $59.2m in 2015 was attributable to the reduction in activity in the year and the final settlement of the Dorad contract.

Expenditure on acquisitions of $238.0m includes $233.9m in relation to the acquisitions of Beta, ATG, Infinity and Kelchner. $4.1m relates to payments made in respect of companies acquired in prior periods.

Payments for capex and intangible assets were lower at $82.6m (2014: $110.2m) due in part to a planned reduction in capital expenditure in response to a challenging market. Expenditure included plant & infrastructure, design software and development expenditure on ERP systems throughout the Group.

Summary Balance Sheet

The balance sheet below has been prepared using equity accounting for joint ventures, and as such does not proportionally consolidate the joint ventures assets and liabilities.  

Dec       Dec

2015      2014

$m        $m

Non-current assets 2,656.8   2,739.6

Current assets 1,410.3   1,647.3

Current liabilities (849.5) (1,093.9)

Net current assets                             560.8     553.4

Non-current liabilities (796.6)   (733.7)

Net assets 2,421.0   2,559.3

Equity attributable to owners of the parent 2,398.3   2,546.2

Non-controlling interests                       22.7      13.1

Total equity 2,421.0   2,559.3

The reduction in non-current assets during the year reflects the impairment of the investment in EthosEnergy partly offset by the increase in goodwill and intangible assets resulting from the four new acquisitions in 2015.   

Current assets and current liabilities are lower than 2014 reflecting the lower level of activity and net current assets are broadly in line with December 2014. The increase in non-current liabilities is largely due to the provision for deferred consideration on new acquisitions.

Total equity was impacted by exchange movements of $175.4m (2014: $147.4m) on retranslation of foreign currency net assets as a result of the US dollar strengthening against the main currencies to which the Group is exposed, in particular sterling, the Australian dollar and the Canadian dollar.

Capital efficiency

Net debt (including our share of JV net debt) to Total EBITDA was 0.55 times (2014: 0.48 times).   The Board would generally expect net debt to EBITDA on this basis to be in a range of around 0.5 to 1.5 times going forward and to be typically below 1.0 times.  

The Group’s Return on Capital Employed (“ROCE”)⁵ reduced from 17.7% to 16.3% due to lower profits in the period.

The Group’s ratio of average Operating Capital Employed to Revenue (OCER) was the same as 2014 at 16%. 

Pensions

The majority of the Group’s pension arrangements are on a defined contribution basis. The Group operates one UK defined benefit scheme which had 1,144 deferred, pensionable deferred or pensionable members at 31 December 2015. The scheme was closed to future accrual at 30 June 2014.

At 31 December 2015, the scheme had a surplus of $4.5m (2014: $27.0m deficit) before recognition of a deferred tax liability of $0.9m (2014: asset $5.4m).  In assessing the potential liabilities, judgement is required to determine the assumptions around inflation, investment returns and member longevity. The reduction in the deficit from 2014 was due to the payment of additional contributions by the company and actuarial gains during the year.

Full details of pension assets and liabilities are provided in note 29 to the Group financial statements.

Acquisitions

During the year, the Group completed a number of acquisitions, the initial cost of which amounted to $233.9m, net of cash acquired.  The acquisitions completed were Beta Machinery Analysis ($9.2m), a Calgary-based engineering consultancy specialising in advanced vibration analysis; Automated Technology Group ($42.1m), an independent supplier of control and power solutions for industrial automation in the UK; Infinity Group ($155.4m), an industrial construction and maintenance contractor serving the petrochemical, refining and gas processing sectors in the Texas Gulf Coast; and Kelchner Inc. ($27.2m), a US-based provider of construction and energy field services.

Goodwill of $135.9m has been recognised in relation to the companies acquired during the year.

***********************

Footnotes

1 Total EBITA represents operating profit including JVs on a proportional basis of $189.5m (2014: $486.0m) before the deduction of amortisation of $109.0m (2014: $101.2m) and net exceptional expense of $171.2m (2014: income $37.6m) and is provided as it is a key unit of measurement used by the Group in the management of its business.

2 Adjusted diluted earnings per share (“AEPS”) is calculated by dividing earnings before exceptional items and amortisation, net of tax, by the weighted average number of ordinary shares in issue during the period, excluding shares held by the Group's employee share ownership trusts and adjusted to assume conversion of all potentially dilutive ordinary shares.

3 Number of people includes both employees and contractors at 31 December 2015 and includes joint ventures.

4 Interest cover is EBITA divided by net finance expense.

5 Return of Capital Employed (“ROCE”) is EBITA divided by average capital employed.  

JOHN WOOD GROUP PLC

GROUP FINANCIAL STATEMENTS

FOR THE YEAR TO 31^ST DECEMBER 2015

Company Registration Number SC 36219

Consolidated income statement

for the year to 31 December 2015

2015 2014

Pre- Exceptional Pre- Exceptional

Exceptional       Items           Exceptional       Items

Items    (note 4) Total       Items    (note 4) Total

Note          $m          $m        $m          $m          $m        $m

Revenue from continuing operations 1        5,000.6           - 5,000.6     6,574.1           - 6,574.1

Cost of sales (4,183.4)           - (4,183.4)   (5,564.7)           - (5,564.7)

Gross profit                                                      817.2           - 817.2     1,009.4           - 1,009.4

Administrative expenses (501.3)      (45.9)   (547.2) (592.9)        50.9   (542.0)

Impairment of investment in joint ventures 4,10           -     (137.2) (137.2)           -           -         -

Share of post-tax profit from joint ventures 10          25.1         1.5      26.6        20.3         9.7      30.0

Operating profit 1          341.0     (181.6) 159.4       436.8        60.6 497.4

Finance income 2            3.1           -       3.1         1.4           -       1.4

Finance expense 2         (23.9)           - (23.9)      (23.7)           - (23.7)

Profit before taxation from continuing operations 3          320.2     (181.6) 138.6       414.5        60.6 475.1

Taxation 5         (71.0)         9.0 (62.0)     (102.9)      (10.0) (112.9)

Profit for the year from continuing operations                    249.2     (172.6)      76.6 311.6        50.6     362.2

Profit/(loss) from discontinued operations, net of tax 4             -        13.5      13.5 (2.9)      (23.0)    (25.9)

Profit for the year 249.2     (159.1)      90.1 308.7        27.6     336.3

Profit attributable to:

Owners of the parent 238.1     (159.1)      79.0 299.9        22.1     322.0

Non-controlling interests 25          11.1           -      11.1         8.8         5.5      14.3

249.2     (159.1)      90.1 308.7        27.6     336.3

Earnings per share (expressed in cents per share)

Basic                                                  7 64.5      (43.1)      21.4        81.9         6.0      87.9

Diluted 7           62.8      (42.0)      20.8        79.9         5.9      85.8

The notes on pages 22 to 75 are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

for the year to 31 December 2015

2015    2014

Note      $m $m

Profit for the year 90.1   336.3

Other comprehensive income/(expense)

Items that will not be reclassified to profit or loss

Re-measurement gains/(losses) on retirement benefit scheme              29      24.9 (16.5)

Movement in deferred tax relating to retirement benefit scheme          5 (4.9)     3.3

Total items that will not be reclassified to profit or loss                     20.0  (13.2)

Items that may be reclassified subsequently to profit or loss

Cash flow hedges 24     (0.1)   (0.1)

Tax credit relating to foreign exchange on net investment in subsidiary 5          - 15.0

Exchange movements on retranslation of foreign currency net assets      24 (175.4) (147.4)

Exchange movements on retranslation of non-controlling interests        25 (0.5)   (0.3)

Total items that may be reclassified subsequently to profit or loss          (176.0) (132.8)

Other comprehensive expense for the year, net of tax                         (156.0) (146.0)

Total comprehensive (expense)/income for the year                             (65.9)   190.3

Total comprehensive (expense)/income for the year is attributable to:

Owners of the parent (76.5)   176.3

Non-controlling interests 10.6    14.0

(65.9)   190.3

Total comprehensive (expense)/income for the year is attributable to:

Continuing operations (79.4)  216.2

Discontinued operations 4   13.5 (25.9)

(65.9)  190.3

Exchange movements on the retranslation of net assets could be subsequently reclassified to profit or loss in the event of the disposal of a business.

The notes on pages 22 to 75 are an integral part of these consolidated financial statements.

Consolidated balance sheet

as at 31 December 2015

Restated

2015     2014

Note      $m       $m

Assets

Non-current assets

Goodwill and other intangible assets        8    2,004.5 1,943.5

Property plant and equipment                9      204.2 194.6

Investment in joint ventures                10     300.4 460.0

Long term receivables 12      80.7     79.2

Retirement benefit scheme surplus           29       4.5        -

Deferred tax assets 19      62.5     62.3

2,656.8  2,739.6

Current assets

Inventories                                 11       8.1 9.1

Trade and other receivables 12   1,176.0  1,470.1

Income tax receivable 21.7     11.5

Cash and cash equivalents 13     204.5    156.6

1,410.3  1,647.3

Liabilities

Current liabilities

Borrowings                                  15      29.9 14.7

Trade and other payables 14     753.9    969.1

Income tax liabilities 65.7    110.1

849.5  1,093.9

Net current assets 560.8    553.4

Non-current liabilities

Borrowings                                  15 495.0    495.0

Deferred tax liabilities 19       6.0      3.9

Retirement benefit scheme deficit           29         - 27.0

Other non-current liabilities 16     200.8    129.7

Provisions                                  18      94.8 78.1

796.6    733.7

Net assets 2,421.0  2,559.3

Equity attributable to owners of the parent

Share capital                               21 23.8     23.7

Share premium 22      63.9     56.0

Retained earnings 23   2,162.4  2,142.8

Other reserves 24     148.2    323.7

2,398.3  2,546.2

Non-controlling interests                   25      22.7 13.1

Total equity 2,421.0  2,559.3

The 2014 comparative figures for trade and other receivables and cash and cash equivalents have been restated by $26.5m in relation to a restricted cash balance.  See note 12 for further details.  The financial statements on pages 17 to 75 were approved by the board of directors on 22 February 2016 and signed on its behalf by:

Robin Watson, Director David Kemp, Director

The notes on pages22 to 75 are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

for the year to 31 December 2015

Equity attributable to owners of the parent

$m

Non-

Share   Share Retained    Other controlling   Total

capital premium earnings reserves interests  equity

Note      $m      $m $m       $m $m      $m

At 1 January 2014 23.6    56.0  1,856.6 471.2 2,407.4         8.9 2,416.3

Profit for the year -       - 322.0        - 322.0        14.3   336.3

Other comprehensive income/(expense):

Re-measurement losses on retirement benefit scheme                         29       - -   (16.5)        - (16.5)           - (16.5)

Movement in deferred tax relating to retirement benefit scheme              5       - -      3.3        - 3.3           -     3.3

Cash flow hedges 24       -       - -    (0.1) (0.1)           -   (0.1)

Tax credit relating to foreign exchange on net investment in subsidiary             -       - 15.0        - 15.0           -    15.0

Net exchange movements on retranslation of foreign currency net assets  24/25 -       -        - (147.4) (147.4)       (0.3) (147.7)

Total comprehensive income/(expense) for the year                                   -       - 323.8  (147.5) 176.3        14.0   190.3

Transactions with owners:

Dividends paid                                                           6/25       - -   (87.2)        - (87.2)       (7.7)  (94.9)

Transactions with non-controlling interests                                         -       - 8.5        -                                         8.5       (2.1) 6.4

Credit relating to share based charges                                     20       - -     19.5        - 19.5           -    19.5

Tax credit relating to share option schemes                                         -       - 1.8        - 1.8           -     1.8

Shares allocated to employee share trusts                                  23     0.1 -    (0.1)        - -           -       -

Shares disposed of by employee share trusts                                23       - -     11.2        - 11.2           -    11.2

Exchange movements in respect of shares held by employee share trusts               -       - 8.7        - 8.7           -     8.7

At 31 December 2014 23.7    56.0  2,142.8 323.7 2,546.2        13.1 2,559.3

Profit for the year -       -     79.0 - 79.0        11.1    90.1

Other comprehensive income/(expense):

Re-measurement gains on retirement benefit scheme                          29       - -     24.9        - 24.9           -    24.9

Movement in deferred tax relating to retirement benefit scheme              5       - -    (4.9)        - (4.9)           -   (4.9)

Cash flow hedges 24       -       - -    (0.1) (0.1)           -   (0.1)

Net exchange movements on retranslation of foreign currency net assets  24/25 -       -        - (175.4) (175.4)       (0.5) (175.9)

Total comprehensive income/(expense) for the year                                   -       - 99.0  (175.5) (76.5)        10.6  (65.9)

Transactions with owners:

Dividends paid 6/25       - -  (104.9)        - (104.9)       (1.0) (105.9)

Credit relating to share based charges                                     20       - -     12.7        -                                        12.7           - 12.7

Tax credit relating to share option schemes                                 5       - -      7.5        - 7.5           -     7.5

Shares allocated to employee share trusts                                  23     0.1 7.9    (8.0)        - -           -       -

Shares disposed of by employee share trusts                                23       - -      5.6        -                                         5.6           - 5.6

Exchange movements in respect of shares held by employee share trusts      23 -       -      7.7 - 7.7           -     7.7

At 31 December 2015                                                              23.8    63.9 2,162.4    148.2 2,398.3        22.7 2,421.0

The notes on pages 22 to 75 are an integral part of these consolidated financial statements.

Consolidated cash flow statement

for the year to 31 December 2015

Restated

2015     2014

Note      $m $m

Cash generated from operations                               26     562.9 544.9

Tax paid (96.6)   (84.9)

Net cash generated from operating activities                        466.3    460.0

Cash flows from investing activities

Acquisition of subsidiaries (net of cash acquired) 27   (238.0)  (258.1)

Proceeds from divestment of subsidiaries                                -      1.7

Payments received from EthosEnergy                                    9.7     58.6

Purchase of property plant and equipment                     9     (36.1) (59.0)

Proceeds from sale of property plant and equipment                    1.8      2.9

Purchase of intangible assets                                8     (46.5) (51.2)

Interest received 2.4      1.4

Repayment of loans from/(advances) to joint ventures                 11.0   (78.0)

Net cash used in investing activities                             (295.7)  (381.7)

Cash flows from financing activities

Proceeds from/(repayment of) bank loans                      26      15.7 (331.0)

Proceeds from senior loan notes                                         -    375.0

Acquisition of non-controlling interests                                -    (4.8)

Proceeds from disposal of shares by employee share trusts    23 5.6     11.2

Interest paid (23.6)   (13.2)

Dividends paid to shareholders                               6    (104.9) (87.2)

Dividends paid to non-controlling interests                  25     (1.0) (7.7)

Net cash used in financing activities                             (108.2)   (57.7)

Net increase in cash and cash equivalents                    26      62.4 20.6

Effect of exchange rate changes on cash and cash equivalents 26    (14.5) (9.0)

Opening cash and cash equivalents                                   156.6 145.0

Closing cash and cash equivalents                            13     204.5 156.6

The notes on pages 22 to 75 are an integral part of these consolidated financial statements.

Notes to the financial statements

for the year to 31 December 2015

General information

John Wood Group PLC, its subsidiaries and joint ventures, provide services to the oil and gas and power generation industries worldwide.  Details of the Group’s activities during the year are provided in the Strategic Report.  John Wood Group PLC is a public limited company, incorporated and domiciled in Scotland and listed on the London Stock Exchange.

Accounting Policies

Basis of preparation

These financial statements have been prepared in accordance with IFRS and IFRIC interpretations adopted by the European Union (‘EU’) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  The financial statements are also in compliance with IFRS as issued by the International Accounting Standards Board.  The Group financial statements have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of financial assets and liabilities at fair value through the income statement. 

Significant accounting policies

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

Basis of consolidation

The Group financial statements are the result of the consolidation of the financial statements of the Group’s subsidiary undertakings from the date of acquisition or up until the date of divestment as appropriate.  Subsidiaries are entities over which the Group has the power to govern the financial and operating policies and generally accompanies a shareholding of more than one half of the voting rights.  All Group companies apply the Group’s accounting policies and prepare financial statements to 31 December.

Joint ventures

A joint venture is a type of joint arrangement where the parties to the arrangement share rights to its net assets. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries.

The Group’s interests in joint ventures are accounted for using equity accounting.  Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture from the acquisition date. The results of the joint ventures are included in the consolidated financial statements from the date the joint control commences until the date that it ceases. The Group includes its share of joint venture profit on the line ‘Share of post-tax profit from joint ventures’ in the Group income statement and its share of joint venture net assets in the ‘investment in joint ventures’ line in the Group balance sheet. 

Critical accounting judgments and estimates

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. These estimates are based on management’s best knowledge of the amount, event or actions and actual results ultimately may differ from those estimates. The estimates and assumptions that could

result in a material adjustment to the carrying amounts of assets and liabilities are addressed below.

(a) Impairment of goodwill

The Group carries out impairment reviews whenever events or changes in circumstance indicate that the carrying value of goodwill may not be recoverable. In addition, the Group carries out an annual impairment review.  An impairment loss is recognised when the recoverable amount of goodwill is less than the carrying amount. The impairment tests are carried out by CGU (‘Cash Generating Unit’) and reflect the latest Group budgets as approved by the Board.  The budgets are based on various assumptions relating to the Group’s businesses

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

including assumptions relating to market outlook, resource utilisation, contract awards and contract margins.  The outlook for the Group is discussed in the CEO Review. Pre-tax discount rates of between 12% and 15% have been used to discount the CGU cash flows and a terminal value is applied using a 3% long term growth rate.  A sensitivity analysis has been performed allowing for possible changes to both the discount rate and long term growth rate. See note 8 for further details.

(b) Impairment of investment in EthosEnergy joint venture

The Group’s investment in the EthosEnergy joint venture is accounted for using equity accounting. An impairment review was carried out in December 2015 based on the latest forecasts for EthosEnergy. The recoverable amount of the investment per the review was lower than the book value and an impairment of $137.2m was recorded in the income statement. A sensitivity analysis has also been performed allowing for possible changes to both the discount rate and long term growth rate. See note 10 for further details.

(c) Income taxes

The Group is subject to income taxes in numerous jurisdictions and judgement is required in determining the provision for income taxes.  The Group provides for uncertain tax positions based on the best estimate of the most likely outcome in respect of the relevant issue.  Where the final outcome on uncertain tax positions is different from the amounts initially recorded, the difference will have an impact on the Group’s tax charge.  See note 5 for further details.

(d) Retirement benefit scheme surplus/deficit

The Group operates a defined benefit pension scheme in the UK which was closed to future accrual on 30 June 2014. The value of the Group’s retirement benefit scheme surplus/deficit is determined on an actuarial basis using a number of assumptions.  Changes in these assumptions will impact the carrying value of the surplus/deficit.  The Group determines the appropriate discount rate to be used in the actuarial valuation at the end of each financial year following consultation with the retirement benefit scheme actuary.  In determining the rate used, consideration is given to the interest rates of high quality corporate bonds in the currency in which the benefits will be paid and that have terms to maturity similar to those of the related retirement benefit obligation.  See note 29 for further details.

(e) Provisions

The Group records provisions where it has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the obligation can be made.  Where the outcome is less than probable, but more than remote, no provision is recorded but a contingent liability is disclosed in the financial statements, if material.  The recording of provisions is an area which requires the exercise of management judgement relating to the nature, timing and probability of the liability and typically the Group’s balance sheet includes provisions for doubtful debts, warranty provisions, contract provisions (including onerous contracts) and pending legal issues. See note 18 for further details.

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 these financial statements:

2015   2014

Average rate £1 = $ 1.5289 1.6469

Closing rate £1 = $ 1.4739 1.5593

Foreign currencies

Income statements of entities whose functional currency is not the US dollar are translated into US dollars at average rates of exchange for the period and assets and liabilities are translated into US dollars at the rates of exchange ruling at the balance sheet date.  Exchange differences arising on translation of net assets in such

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

entities held at the beginning of the year, together with those differences resulting from the restatement of profits and losses from average to year end rates, are taken to the currency translation reserve. 

In each individual entity, transactions in overseas currencies are translated into the relevant functional currency at the exchange rates ruling at the date of the transaction.  Where more than one exchange rate is available, the appropriate rate at which assets can be readily realised and liabilities can be extinguished is used.  Monetary

assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date.  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 financial statements of John Wood Group PLC at the exchange rate ruling on the date it was raised.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group’s activities.  Revenue is recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and the amount of revenue can be measured reliably. Revenue is recognised as the services are rendered, including where they are based on contractual rates per man hour in respect of multi-year service contracts.  Incentive performance revenue is recognised upon completion of agreed objectives. Revenue is stated net of sales taxes (such as VAT) and discounts.  

Revenue on fixed price or lump sum contracts for services, construction contracts and fixed price long-term service agreements is recognised according to the stage of completion reached in the contract by measuring the proportion of costs incurred for work performed to total estimated costs.  An estimate of the profit attributable to work completed is recognised, on a basis that the directors consider to be appropriate, once the outcome of the contract can be estimated reliably, which is when a contract is not less than 20% complete.  When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately.  The net amount of costs incurred to date plus recognised profits less progress billings is disclosed within trade and other receivables. Revenue from fixed price and lump sum contracts is not material in the current period. 

Details of the services provided by the Group are provided on page 28 under the ‘Segmental Reporting’ heading.

Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to

enable a full understanding of the Group’s financial performance.  Transactions which may give rise to exceptional items include gains and losses on divestment of businesses, write downs or impairments of assets including goodwill, restructuring costs or provisions, litigation settlements, provisions for onerous contracts and acquisition and divestment costs. See note 4 for full details of exceptional items.

Finance expense/income

Interest income and expense is recorded in the income statement in the period to which it relates.  Arrangement fees and expenses in respect of the Group’s debt facilities are amortised over the period which the Group expects the facility to be in place.  Interest relating to the unwinding of the discount on deferred and contingent consideration liabilities is included in finance expense.  Interest relating to the Group’s retirement benefit scheme is also included in finance expense.

Dividends

Dividends to the Group’s shareholders are recognised as a liability in the period in which the dividends are approved by shareholders.  Interim dividends are recognised when paid.

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 fair value of the net assets acquired.  Goodwill is carried at cost less

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

accumulated impairment losses.  Goodwill is not amortised.  Acquisition costs are expensed and included in administrative expenses in the income statement.  

Intangible assets

Intangible assets are carried at cost less accumulated amortisation.  Intangible assets are recognised if it is probable that there will be future economic benefits attributable to the asset, the cost of the asset can be

measured reliably, the asset is separately identifiable and there is control over the use of the asset.  Where the Group acquires a business, intangible assets on acquisition such as customer contracts are identified and evaluated to determine the carrying value on the acquisition balance sheet.  Intangible assets are amortised over their estimated useful lives, as follows:

Software                       3-5 years

Development costs and licenses 3-5 years

Development costs and licenses 5 years

Property plant and equipment

Property plant and equipment (PP&E) is stated at cost less accumulated depreciation and impairment.  No depreciation is charged with respect to freehold land and assets in the course of construction.

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

Freehold and long leasehold buildings 25-50 years

Short leasehold buildings             period of lease

Plant and equipment                   3-10 years

When estimating the useful life of an asset group, the principal factors the Group takes into account are the durability of the assets, the intensity at which the assets are expected to be used and the expected rate of technological developments. Asset lives and residual values are assessed at each balance sheet date.

Impairment

The Group performs impairment reviews in respect of PP&E, investment in joint ventures and intangible assets whenever events or changes in circumstance indicate that the carrying amount may not be recoverable.  In addition, the Group carries out annual impairment reviews in respect of goodwill.  An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset’s fair value less costs to sell and its value in use, is less than its carrying amount. 

For the purposes of impairment testing, goodwill is allocated to the appropriate cash generating unit (‘CGU’).  The CGUs 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 and goods for resale, are stated at the lower of cost and net realisable value.  

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.

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

Cash and cash equivalents

Cash and cash equivalents include cash in hand and other short-term bank deposits with maturities of three months or less.  Bank overdrafts are included within borrowings in current liabilities.  Where the Group uses pooling arrangements with a right of set-off, overdrafts and cash are netted and included in the appropriate category depending on the net position of the pool.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.  A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according

to the original terms of the receivables.  The provision is determined by reference to previous experience of recoverability for receivables in each market in which the Group operates.  

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred.   Borrowings are subsequently stated at amortised cost.

Deferred and contingent consideration

Where deferred or contingent consideration is payable on the acquisition of a business based on an earn out arrangement, an estimate of the amount payable is made at the date of acquisition and reviewed regularly thereafter, with any change in the estimated liability being reflected in the income statement.  Where deferred consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest. Deferred and contingent consideration is recognised at fair value.

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.  Taxable profit differs from the profit reported in the income statement due to items that are not taxable or deductible in any period and also due to items that are taxable or deductible in a different period.  The Group’s liability for current tax is calculated using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is provided, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.  The principal temporary differences arise from depreciation on PP&E, tax losses carried forward and, in relation to acquisitions, the difference between the fair values of the net assets acquired and their tax base.  Tax rates enacted, or substantially enacted, at the balance sheet date are used to determine deferred tax.

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

Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently re-measured at fair value. 

Where hedging is to be undertaken, the Group documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as the risk management objective and strategy for

undertaking the hedge transaction.  The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. 

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the hedging reserve in equity.  The gain or loss relating to the ineffective portion is recognised immediately in administrative expenses (in the case of forward contracts) or finance income/expense (in the case of interest rate swaps) in the income statement.  When a hedging instrument expires or is sold, when a hedge no longer meets the criteria for hedge accounting, or when a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

When appropriate, the Group also uses fair value and net investment hedges.

Fair value estimation

The fair value of interest rate swaps is calculated as the present value of their estimated future cash flows.  The fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the balance sheet date.  The fair values of all derivative financial instruments are obtained from valuations provided by financial institutions.

The carrying values of trade receivables and payables approximate to their fair values.  

The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. 

Operating leases

As lessee

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

As lessor

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

Finance leases

A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease. Finance leases are capitalised at the commencement of the lease at the present value of the minimum lease payments. Lease payments are apportioned between finance expense and a reduction of the lease liability so as to achieve a constant rate of interest on the outstanding balance. Leased assets are depreciated over their estimated useful life.

Retirement benefit scheme surplus/deficit

The Group operates a defined benefit scheme and a number of defined contribution schemes.  The surplus or deficit recognised in respect of the defined benefit scheme represents the difference between the present value of the defined benefit obligations and the fair value of the scheme assets.  The assets of this scheme are held in separate trustee administered funds. The scheme was closed to future accrual on 30 June 2014.

The defined benefit scheme’s assets are measured using fair values.  Pension scheme liabilities are measured annually by an independent actuary using the projected unit method and discounted at the current rate of return

on a high quality corporate bond of equivalent term and currency to the liability.  The increase in the present value of the liabilities of the Group’s defined benefit scheme expected to arise from employee service in the

period is charged to operating profit.  The interest income on scheme assets and the increase during the period in the present value of the scheme’s liabilities arising from the passage of time are netted and included in finance

expense. Re-measurement gains and losses are recognised in the statement of comprehensive income in full in the period in which they occur.  The defined benefit scheme’s surplus/deficit is recognised in full and presented on the face of the Group balance sheet.

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

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

The Group operates a pension arrangement in the US for certain employees. Contributions are paid into a separate investment vehicle and invested in a portfolio of US funds that are recognised by the Group as a long term receivable with a corresponding liability in other non-current liabilities.   Investments are carried at fair value.  The fair value of listed equity investments and mutual funds is based on quoted market prices and so the fair value measurement can be categorised in Level 1 of the fair value hierarchy.

Provisions

Provision is made for the estimated liability on all products and services still under warranty, including claims already received, based on past experience.  Other provisions are recognised where the Group is deemed to have a legal or constructive obligation, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate of the obligation can be made.  Where amounts provided are payable after more than one year the estimated liability is discounted using an appropriate rate of interest. See note 18 for further details.

Share based charges relating to employee share schemes

The Group has recorded share based charges in relation to a number of employee share schemes.

Charges are booked to the income statement as an employee benefit expense for the fair value of share options expected to be exercised under the Executive Share Option Schemes (‘ESOS’) and the Long Term Retention Plan (‘LTRP’). Amounts are accrued over the vesting period with the corresponding credit taken to retained earnings.

Options are also awarded under the Group’s Long Term Plan (‘LTP’) which is the incentive scheme in place for executive directors and certain senior executives. The charge for options awarded under the LTP is based on the fair value of those options at the grant date, spread over the vesting period.  The corresponding credit is taken to retained earnings.  For awards that have a market related performance measure, the fair value of the market related element is calculated using a Monte Carlo simulation model.

For further details of these schemes, please see note 20 and the Directors Remuneration Report.

Share capital

John Wood Group PLC has one class of ordinary shares and these are classified as equity. Dividends on ordinary shares are not recognised as a liability or charged to equity until they have been approved by shareholders.

The Group is deemed to have control of the assets, liabilities, income and costs of its employee share trusts, therefore they have been consolidated in the financial statements of the Group.  Shares acquired by and disposed of by the employee share trusts are recorded at cost.  The cost of shares held by the employee share trusts is deducted from equity.

Segmental reporting

The Group has determined that its operating segments are based on management reports reviewed by the Chief Operating Decision Maker (‘CODM’), the Group’s Chief Executive.  The Group’s reportable segments are Wood Group Engineering and Wood Group PSN. Following the formation of the EthosEnergy joint venture in 2014, all of the Group’s predominantly opex related turbine activities are carried out through joint ventures and now managed and reported as part of Wood Group PSN. In order to provide visibility over the performance of the turbine activities, they are included on a separate line (Wood Group PSN – Turbine activities) in the Group’s management information. 

Notes to the financial statements

for the year to 31 December 2015

Accounting Policies (continued)

The Chief Executive measures the operating performance of these segments using ‘EBITA’ (Earnings before interest, tax and amortisation).  Operating segments are reported in a manner consistent with the internal management reports provided to the Chief Executive who is responsible for allocating resources and assessing performance of the operating segments.

Wood Group Engineering provides a wide range of specialist engineering services including conceptual studies, engineering, project and construction management (EPCM) and control systems upgrades to the upstream, subsea and pipeline, downstream, chemical process, automation and industrial and clean energy sectors.

Wood Group PSN – Production Services provides services to the upstream, midstream, downstream and industrial sectors through brownfield engineering and modifications, production enhancement, operations and maintenance, facility construction and maintenance management, industrial services, training and decommissioning services.

Wood Group PSN – Turbine activities provides industrial gas turbine and rotating equipment repair, maintenance, overhaul and power plant EPC services to the oil and gas and power sectors.

Disclosure of impact of new and future accounting standards

(a) Amended standards and interpretations

IAS 19 ‘Employee benefits’ was amended with effect from 1 January 2015. The amendment does not have a material impact on the Group’s financial statements.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2018, but the Group has not early adopted them:

-- IFRS 15 'Revenue from contracts with customers' is effective for

accounting periods beginning on or after 1 January 2018. The Group is in

the process of assessing the likely impact of this standard on the

financial statements.

-- IFRS 9 'Financial 'instruments' is effective for accounting periods on

or after 1 January 2018. The Group does not expect the adoption of this

standard to have a material impact on the financial statements.

-- IFRS 16 'Leases' is effective for accounting periods beginning on or

after 1 January 2019. The Group is in the process of assessing the

likely impact of this standard on the financial statements.

Amendments have also been made to the following standards effective 1 January 2016. The Group does not expect the amendments to have a material impact on the Group’s financial statements.

-- IFRS 11 'Joint arrangements'

-- IAS 16 'Property, plant and equipment'

-- IAS 38 'Intangible assets'

-- IAS 27 'Separate financial statements'

-- IFRS 10 'Consolidated financial statements'

-- IAS 1 'Presentation of financial statements'

All other amendments not yet effective and not included above are not material or applicable to the Group.

1 Segmental reporting

The Group operates through two segments, Wood Group Engineering and Wood Group PSN. Following the formation of the EthosEnergy joint venture in 2014, all of the Group’s predominantly opex related turbine activities are carried out through joint ventures and now managed and reported as part of Wood Group PSN. In order to provide visibility over the performance of the turbine activities, they are included on a separate line in the table below (Wood Group PSN – Turbine activities). This presentation is consistent with the Group’s internal management reporting. Under IFRS 11 ‘Joint arrangements’, the Group is required to account for joint ventures using equity accounting, however for management reporting the Group continues to use proportional consolidation, hence the inclusion of the proportional presentation in this note.

The segment information provided to the Group’s Chief Executive for the reportable operating segments for the year ended 31 December 2015 includes the following:

Reportable Operating Segments (1)

Revenue EBITDA(1)                EBITA(1)          Operating profit

Year ended  Year ended Year ended  Year ended  Year ended Year ended  Year ended  Year ended

31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014

$m          $m          $m          $m          $m          $m          $m          $m

Wood Group Engineering 1,728.6     2,130.7       232.2       248.1       214.7       232.0       159.7       203.9

Wood Group PSN - Production Services                           3,447.8     4,636.0       286.7       368.0       258.0       341.7       190.2       336.1

Wood Group PSN - Turbine activities                              676.0       849.7        56.1        47.3        44.2        33.3 (116.7)        28.5

Well Support - divested -           -           -           -           - -        10.4           -

Central costs (2) -           -      (43.3)      (52.8)      (47.2)      (57.4)      (54.1)      (82.5)

5,852.4     7,616.4       531.7       610.6       469.7       549.6       189.5       486.0

Total

Remove discontinued -     (188.5)           -       (0.7)           -         1.7      (10.4)        27.3

Remove share of joint ventures                                 (851.8)     (853.8)      (59.9)      (53.2)      (46.7)      (38.5)      (46.3)      (45.9)

5,000.6     6,574.1       471.8       556.7 423.0       512.8       132.8       467.4

Total continuing operations excluding joint ventures

26.6        30.0

Share of post-tax profit from joint ventures

Operating profit 159.4       497.4

Finance income 3.1         1.4

Finance expense (23.9)      (23.7)

Profit before taxation from continuing operations 138.6       475.1

Taxation                                                                                                                                (62.0)     (112.9)

Profit for the year from continuing operations 76.6       362.2

Profit/(loss) from discontinued operations, net of tax (3) 9.7        13.5      (25.9)

Profit for the year 90.1       336.3

1 Segmental reporting (continued)

Notes

1. A reconciliation of EBITA to Operating profit is provided in the table

below. EBITDA represents EBITA before depreciation of property plant and

equipment of $62.0m (2014 : $61.0m). EBITA and EBITDA are provided as they

are units of measurement used by the Group in the management of its

business.

2. Central costs include the costs of certain management personnel in both the

UK and the US, along with an element of Group infrastructure costs. Central

costs in 2014 are stated after deducting $23.0m of exceptional costs

relating to the                  formation of the EthosEnergy joint

venture.

3. Profit from discontinued operations, net of tax, for 2015 relates to the

reassessment of amounts provided on the disposal of the Well Support

business in 2011 (see note 4 for further details). Profit from discontinued

operations in 2014 represents the profit from the Wood Group GTS businesses

transferred to EthosEnergy from January to April 2014.

4. Revenue arising from sales between segments is not material.

Reconciliation of EBITA to Operating Profit

2015    2014

$m      $m

EBITA                                                 469.7   549.6

Amortisation                                        (109.0) (101.2)

Exceptional items included in continuing operations (181.6)    60.6

Discontinued operating loss -     4.3

Share of joint venture interest (2.3)   (1.9)

Share of joint venture tax (17.4)  (14.0)

Operating profit 159.4   497.4

1  Segmental Reporting (continued)

Segment assets and liabilities

Wood Group  Wood Group Wood Group Unallocated   Total

Engineering          SN        PSN

-Production   -Turbine

Services activities

At 31 December 2015          $m          $m         $m          $m      $m

1,031.4                  416.4             4,067.1

Segment assets                      2,316.3                  303.0

410.3                   20.6             1,646.1

Segment liabilities                   552.2                  663.0

At 31 December 2014

Segment assets          1,094.5 2,345.3 675.3 271.8 4,386.9

Segment liabilities       524.9          34.4       1,827.6

635.3       633.0

Unallocated assets and liabilities include income tax, deferred tax and cash and cash equivalents and borrowings where this relates to the financing of the Group’s operations.

1  Segmental Reporting (continued)

Other segment items

2015 Wood Group Wood Group  Wood Group Unallocated Total

Engineering       PSN- PSN-Turbine

Production  activities

Services

$m         $m          $m          $m $m

Capital expenditure

- Property plant and equipment                        12.0       22.5           -         1.6 36.1

- Intangible assets                                   21.4       15.7           -         9.4 46.5

Non-cash expense

- Depreciation of property plant and equipment        17.3       27.6           -         3.9 48.8

- Amortisation of intangible assets                   41.2       59.0           -         6.9 107.1

- Exceptional items (non-cash element)                 4.5        9.2       146.5      (10.4) 149.8

2014 $m   $m   $m $m   $m

Capital expenditure

- Property plant and equipment 15.7 34.0  5.3 4.0 59.0

- Intangible assets 31.9 16.0  2.8 0.5 51.2

Non-cash expense

- Depreciation of property plant and equipment 15.6 23.5  2.6 4.6 46.3

- Amortisation of intangible assets 28.1 65.9  2.8 2.1 98.9

- Exceptional items (non-cash element) -  7.5 16.0   - 23.5

The figures in the tables above are prepared on an equity accounting basis and therefore exclude the share of joint ventures.

Depreciation in respect of joint ventures was $13.2m (2014: $14.7m) and joint venture amortisation was $1.9m (2014: $2.3m).

1  Segmental Reporting (continued)

Geographical segments

Segment assets     Continuing

revenue

2015    2014 2015    2014

$m      $m $m      $m

UK                1,121.6 1,196.3 1,441.2 1,979.9

US                1,618.7 1,684.1 1,940.0 2,397.2

Rest of the world 1,326.8 1,506.5 1,619.4 2,197.0

4,067.1 4,386.9 5,000.6 6,574.1

Revenue by geographical segment is based on the location of the ultimate project. Revenue is entirely attributable to the provision of services.

2  Finance expense/(income)

2015  2014

$m    $m

Interest payable on borrowings including senior loan notes                 20.9  15.7

Amortisation of bank facility fees 0.6   4.3

Interest relating to discounting of deferred and contingent consideration   1.5 1.9

Interest expense - retirement benefit obligations (note 29)                 0.9   1.8

Finance expense - continuing operations                                    23.9  23.7

Interest receivable (3.1) (1.4)

Finance income (3.1) (1.4)

Finance expense - continuing operations - net                              20.8  22.3

Net interest expense of $2.3m (2014: $1.9m) has been deducted in arriving at the share of post-tax profit from joint ventures.

In August 2014, the Group issued US$375.0m of unsecured senior loan notes in the US private placement market. The notes were issued at a mix of 7, 10 and 12 year maturities at an average fixed rate of 3.74%. Interest on the senior loan notes is included in finance expense above.

3  Profit before taxation

2015    2014

$m      $m

The following items have been charged in arriving at profit before taxation :

Employee benefits expense (note 28) 2,669.7 3,256.7

Cost of inventories recognised as an expense                                        -    30.6

Depreciation of property plant and equipment (note 9)                            48.8    46.3

Amortisation of intangible assets (note 8) 107.1    98.9

Loss on disposal of property plant and equipment                                  4.0     6.2

Other operating lease rentals payable:

- Plant and machinery 33.7    52.0

- Property                                                                       90.3    79.3

Foreign exchange losses 0.6     7.4

Depreciation of property plant and equipment is included in cost of sales or administrative expenses in the income statement.  Amortisation of intangible assets is included in administrative expenses in the income statement. The information in the above table includes both continuing and discontinued operations and is prepared on an equity accounting basis.

Services provided by the Group’s auditors and associate firms

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

2015 2014

$m   $m

Fees payable to the Group's auditors and its associate firms for -

Audit of parent company and consolidated financial statements       1.0 1.0

Audit of Group companies pursuant to legislation                    2.0  1.9

Tax and other services 0.1  0.1

3.1  3.0

4  Exceptional items

2015   2014

$m     $m

Exceptional items included in continuing operations

Impairment of investment in EthosEnergy (see note 10) 137.2      -

Impairment of Group receivables in relation to EthosEnergy    9.3 -

Impairment recorded by EthosEnergy                           12.6      -

Restructuring charges 36.6    7.5

Venezuela settlement                                            - (58.4)

Onerous contract (14.1)  (9.7)

181.6 (60.6)

Tax (credit)/charge                                         (9.0)   10.0

Continuing operations exceptional items, net of tax 172.6 (50.6)

Exceptional items included in discontinued operations

Gain on divestment - Well Support                          (10.4)      -

Costs relating to EthosEnergy transaction                       -   23.0

(10.4)   23.0

Tax relating to Well Support divestment                     (3.1)      -

Discontinued operations exceptional items, net of tax (13.5)      -

Total exceptional charge/(credit), net of tax               159.1 (27.6)

At 31 December 2015, the Group carried out an impairment review of its investment in the EthosEnergy joint venture. The recoverable amount of the investment of $192.2m is lower than the book value and an impairment

charge of $137.2m has been booked in the income statement. In addition, the Group has impaired its receivables by $9.3m in relation to a balance due by EthosEnergy and an impairment of $12.6m has been recorded by EthosEnergy relating to operations which it intends to divest or close during 2016. See note 10 for further details.

In response to the lower oil price environment, the Group has taken action to reduce its cost base, including the restructuring of its business units to improve operational efficiency. In addition, a review of the Group’s property portfolio has identified onerous property leases in certain locations.  In total, $36.6m of redundancy and onerous lease costs have been incurred and expensed in the income statement in 2015.

In 2013, the Group made an onerous contract provision in respect of Wood Group PSN’s Oman joint venture. During 2015, the contract was successfully transitioned and closed out and the remaining provision of $14.1m was written back to the income statement at the end of the year. See note 10.

A tax credit of $9.0m has been recorded in respect of the exceptional items included in continuing operations.

In 2011, the Group made a provision in respect of the disposal of its Well Support business. The provision has been reassessed at 31 December 2015 with $10.4m of the provision being released to the income statement and credited to exceptional items. A tax provision was also made in 2011 in relation to the disposal. This has also been reassessed at 31 December 2015 and $3.1m has been released to the income statement.

For further details of the 2014 exceptional items please refer to the 2014 Annual Report and Accounts.

5  Taxation

2015 2014

$m     $m

Current tax

- Current year 74.1  142.6

- Adjustment in respect of prior years                 (2.3)    0.6

71.8  143.2

Deferred tax

- Current year                                         (1.7) (15.0)

- Adjustment in respect of prior years                (11.2) (16.7)

(12.9) (31.7)

Total tax charge 58.9  111.5

Comprising -

Tax on continuing operations before exceptional items   71.0 102.9

Tax on exceptional items in continuing operations      (9.0) 10.0

Total tax on continuing operations                      62.0  112.9

Tax on discontinued operations                         (3.1)  (1.4)

Total tax on discontinued operations (3.1)  (1.4)

Total tax charge 58.9  111.5

2015   2014

Tax (credited)/charged to equity $m     $m

Deferred tax movement on retirement benefit liabilities                     4.9  (3.3)

Deferred tax relating to share option schemes                             (5.5)    6.3

Current tax relating to share option schemes                              (2.0)  (8.1)

Deferred tax relating to foreign exchange on net investment in subsidiary     - (11.1)

Current tax relating to foreign exchange on net investment in subsidiary      - (3.9)

Total (credited)/charged to equity                                        (2.6) (20.1)

5  Taxation (continued)

Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates.  The expected rate is the weighted average rate taking into account the Group’s profits in these jurisdictions.  The expected rate has decreased in 2015 due to the change in mix of the tax jurisdictions in which the Group operates. The tax charge for the year is lower (2014: lower) than the expected tax charge due to the following factors:

2015   2014

$m     $m

Profit before taxation from continuing operations (excluding  249.2 445.1

profits from and impairment of joint ventures)

Profit/(loss) before taxation from discontinued operations 10.4 (27.3)

Total profit before taxation                                  259.6  417.8

Profit before tax at expected rate of 25.4% (2014: 27.7%)      65.9 115.7

Effects of:

Adjustments in respect of prior years (13.5) (16.1)

Non-recognition of losses and other attributes 12.6   22.5

Effect of foreign taxes 9.1  (1.5)

Other permanent differences                                  (15.2)  (9.1)

Total tax charge 58.9  111.5

The adjustment in respect of prior years relates to provisions on inter-company write-offs that are now expected to be tax deductible when incurred. Other permanent differences include adjustments for share based charges, research and development allowances, changes in unrecognised tax attributes and expenditure which is not tax deductible. Tax losses are recognised where there is reasonable certainty that they can be utilised in future years.

Net income tax liabilities in the Group balance sheet include $112.7m relating to uncertain tax positions where management has had to exercise judgement in determining the most likely outcome in respect of the relevant issue. The larger amounts relate to tax payable in relation to divestments ($27.9m), recoverability of withholding taxes ($20.5m), and utilisation of tax losses ($17.6m). Where the final outcome on these issues differs to the amounts provided, the Group’s tax charge will be impacted.

Where corporate tax assets and liabilities are in the same jurisdictions, amounts are netted in the Group balance sheet.

6  Dividends

2015 2014

$m   $m

Dividends on ordinary shares

Final dividend paid - year ended 31 December 2014: 18.6 cents (2014:   68.6 54.5

14.9 cents) per share

Interim dividend paid - year ended 31 December 2015: 9.8 cents (2014:  36.3 32.7

8.9 cents) per share

104.9 87.2

The directors are proposing a final dividend in respect of the financial year ended 31 December 2015 of 20.5 cents per share.  The final dividend will be paid on 17 May 2016 to shareholders who are on the register of members on 8 April 2016. The financial statements do not reflect the final dividend, the payment of which will result in an estimated $75.9m reduction in equity attributable to owners of the parent.

7  Earnings per share

2015 2014

Earnings attributable to owners of the parent $m Number of shares (millions) Earnings per share (cents) Earnings attributable to owners of the parent Number of shares Earnings per share (cents)

$m       (millions)

Basic pre-exceptional                                                                                  238.1                       369.0                       64.5 299.9            366.1                       81.9

Exceptional items, net of tax and non-controlling interests (159.1) -                     (43.1) 22.1                -                        6.0

Basic                                                                                                   79.0                       369.0                       21.4 322.0            366.1                       87.9

Effect of dilutive ordinary shares -                        10.3                      (0.6) -              9.1                      (2.1)

Diluted                                                                                                 79.0                       379.3                       20.8 322.0            375.2                       85.8

Exceptional items, net of tax and non-controlling interests 159.1 -                       42.0 (22.1)                -                      (5.9)

Diluted pre-exceptional items                                                                          238.1                       379.3                       62.8 299.9            375.2                       79.9

Amortisation, net of tax                                                                                80.4                           -                       21.2 73.7                -                       19.7

Adjusted diluted                                                                                       318.5                       379.3                       84.0 373.6            375.2                       99.6

Adjusted basic                                                                                         318.5                       369.0                       86.3 373.6            366.1                      102.0

Basic discontinued earnings per share for the year is 3.7 cents (2014: (7.1) cents) and diluted discontinued earnings per share is 3.6 cents (2014: (6.9) cents).

The calculation of basic earnings per share is based on the earnings attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the year excluding shares held by the Group’s employee share trusts.  For the calculation of diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares.  The Group’s dilutive ordinary shares comprise share options granted to employees under Executive Share Option Schemes and the Long Term Retention Plan and shares and share options awarded under the Group’s Long Term Incentive Plan and Long Term Plan.  Adjusted basic and adjusted diluted earnings per share are disclosed to show the results excluding the impact of exceptional items and amortisation, net of tax.

8  Goodwill and other intangible assets

Goodwill    Software  Intangible Total

and      assets

development  arising on

costs acquisition

$m          $m          $m      $m

Cost

At 1 January 2015 1,727.9       184.5       380.4 2,292.8

Exchange movements                       (97.7)       (8.4)      (24.3) (130.4)

Additions                                     -        46.5           - 46.5

Acquisitions (note 27)                    135.9         0.5        77.4 213.8

Disposals                                     -       (1.7)           - (1.7)

Reclassifications                             -        12.1           - 12.1

At 31 December 2015 1,766.1       233.5       433.5 2,433.1

Aggregate amortisation and impairment 1.2       109.3       238.8 349.3

At 1 January 2015

Exchange movements (0.4)       (5.1)      (20.6) (26.1)

Amortisation charge for the year              -        52.9        54.2 107.1

Disposals                                     -       (1.7)           - (1.7)

At 31 December 2015 0.8       155.4       272.4 428.6

Net book value at 31 December 2015 1,765.3        78.1       161.1 2,004.5

Cost

At 1 January 2014 1,622.2       151.9       384.8 2,158.9

Exchange movements (86.4)       (7.4)      (32.0) (125.8)

Additions                                     -        51.2           - 51.2

Acquisitions                              200.0         7.0        27.6 234.6

Disposals                                 (7.9)      (23.1)           - (31.0)

Reclassifications                             -         4.9           - 4.9

At 31 December 2014 1,727.9       184.5       380.4 2,292.8

Aggregate amortisation and impairment

At 1 January 2014 4.7        97.0       202.2 303.9

Exchange movements (0.3)       (3.6)      (24.4) (28.3)

Amortisation charge for the year              -        37.9        61.0 98.9

Disposals                                 (3.2)      (22.0)           - (25.2)

At 31 December 2014 1.2       109.3       238.8 349.3

Net book value at 31 December 2014 1,726.7        75.2       141.6 1,943.5

In accordance with IAS 36 ‘Impairment of assets’, goodwill was tested for impairment during the year.  The impairment tests were carried out by Cash Generating Unit (‘CGU’), the CGU’s being aligned to the Group’s reporting structure.

The reclassifications line includes amounts that were wrongly classified as current assets in prior periods.
8  Goodwill and other intangible assets (continued)

Value-in-use calculations have been prepared for each CGU using the cash flow projections included in the financial budgets approved by management for 2016 and 2017. Cash flows beyond this period are extrapolated using a growth rate of 3% per annum for a further three year period.  A terminal value is applied thereafter in order to calculate long term estimated cash flows using the same anticipated long term growth rate of 3% across all CGUs.  The growth rate used does not exceed the long-term average growth rates for the regions in which the CGUs operate.  The cash flows have been discounted using pre-tax discount rates appropriate for each CGU.

Division        Cash Generating Unit       Goodwill carrying value ($m)

Wood Group Engineering     Wood Group Mustang                                479.0

Wood Group Kenny 85.5

Wood Group PSN - Production Services WG PSN Asia Pacific                               132.7

WG PSN Africa 117.3

WG PSN Middle East and ERC                          5.2

WG PSN Americas 496.5

WG PSN UK 424.4

WG PSN Global Business

24.7

Total Goodwill 1,765.3

The pre-tax discount rates used range from 12-15% and the average for the businesses is 14%.

The impairment tests are carried out using the latest Group budgets as approved by the Board. The budgets are based on various assumptions including market outlook, resource utilisation, contract backlog, contract margins and assumed contract awards. A terminal value is calculated using a long term growth rate of 3%. The value-in-use is then compared to the carrying value for each CGU to determine whether any impairment charge is required. No goodwill has been written off during the current or prior year.  

A sensitivity analysis has been performed on the basis that the expected long term growth rate falls to 2% and that the discount rates are 1% higher than those above in order to assess the impact of reasonable possible changes to the assumptions used in the impairment review.  This analysis did not identify any impairment.

Intangibles arising on acquisition include the valuation of customer contracts and customer relationships recognised on business combinations. As part of the impairment review, the Group has reviewed these contracts and relationships and no impairment was identified.

9  Property plant and equipment

Land and Buildings

Long leasehold and freehold Short leasehold Plant and equipment  Total

$m              $m                  $m     $m

Cost

At 1 January 2015 57.8            20.9               245.8  324.5

Exchange movements (6.6)           (0.7)              (13.8) (21.1)

Additions 2.7             5.6                27.8   36.1

Acquisitions (note 27) -             1.3                17.8   19.1

Disposals (1.6)           (6.4)              (51.0) (59.0)

Reclassifications -               -                16.2   16.2

At 31 December 2015 52.3            20.7               242.8  315.8

Accumulated depreciation and impairment

At 1 January 2015 20.1            11.8                98.0  129.9

Exchange movements (1.8)           (0.4)              (11.7) (13.9)

Charge for the year 3.5             3.2                42.1   48.8

Disposals                                                     (0.3)           (5.4)              (47.5) (53.2)

At 31 December 2015 21.5             9.2                80.9  111.6

Net book value at 31 December 2015                             30.8 11.5               161.9  204.2

Cost

At 1 January 2014 54.4            19.8               224.9  299.1

Exchange movements (2.0)           (0.7)               (6.2) (8.9)

Additions 7.1             3.6                48.3   59.0

Acquisitions -               -                12.9   12.9

Disposals (1.7)           (1.8)              (24.2) (27.7)

Divestment of businesses -               -               (5.0)  (5.0)

Reclassification to intangible assets                             -               -               (4.9)  (4.9)

At 31 December 2014 57.8            20.9               245.8  324.5

Accumulated depreciation and impairment

At 1 January 2014                                              18.9             9.9                83.0  111.8

Exchange movements (0.7)           (0.4)               (5.0)  (6.1)

Charge for the year                                             3.5             3.2                39.6   46.3

Disposals (1.6)           (0.9)              (16.1) (18.6)

Divestment of business -               -               (3.5) (3.5)

At 31 December 2014 20.1            11.8                98.0  129.9

Net book value at 31 December 2014                             37.7             9.1               147.8  194.6

Included in table above are $4.2m of assets under construction at 31 December 2015 (2014: nil).

Reclassifications of plant and machinery in 2015 include $11.5m of vehicles capitalised as finance leases that were treated as operating leases in the prior year financial statements. Liabilities have also been adjusted by a similar amount.

10  Investment in joint ventures

The Group operates a number of joint ventures companies, the most significant of which are its turbine JV’s, EthosEnergy Group Limited and RWG Limited. A full list of subsidiary and joint venture entities is included in note 34. The Group’s share of its joint venture assets, liabilities, income and expenses is shown below.

2015    2014

$m      $m

Non-current assets 101.7   254.2

Current assets 551.4   667.3

Current liabilities (320.4) (375.1)

Non-current liabilities                       (32.3)  (86.4)

Net assets 300.4   460.0

Revenue 851.8   853.8

Cost of sales (719.3) (724.8)

Administrative expenses                       (87.7) (92.8)

Exceptional income 1.5     9.7

Operating profit 46.3    45.9

Net finance expense (2.3)   (1.9)

Profit before tax                               44.0 44.0

Tax (17.4)  (14.0)

Share of post-tax profit from joint ventures 26.6    30.0

The assets, liabilities, income and expenses of the Group’s two most significant joint ventures, EthosEnergy and RWG are shown below.

Ethos Energy      RWG (100%)

(100%)

2015    2014 2015    2014

$m      $m $m      $m

Non-current assets            112.0   396.9 42.6    47.4

Current assets                706.5   859.8 150.2   165.6

Current liabilities         (425.5) (457.6)  (49.0) (53.0)

Non-current liabilities      (16.1)  (92.7) (0.2)       -

Net assets                    376.9 706.4   143.6   160.0

Wood Group share              192.2   360.2 71.8    80.0

Revenue                       916.9   725.3 246.6   246.4

Cost of sales               (783.9) (614.3) (179.8) (184.2)

Administrative expenses     (117.8)  (98.8) (34.0)  (57.2)

Exceptional expense          (24.7)       - -       -

Operating (loss)/profit       (9.5)    12.2 32.8     5.0

Net finance expense           (4.1)   (2.9) -   (0.2)

(Loss)/profit before tax     (13.6)     9.3 32.8     4.8

Tax                          (17.6)  (13.1) (7.2)   (2.4)

Post-tax (loss)/profit       (31.2)   (3.8) 25.6     2.4

Wood Group share             (16.0)   (2.0) 12.8     1.2

10  Investment in joint ventures (continued)

The movement in investments in joint ventures is shown below.

$m

At 1 January 2015                                     460.0

Exchange movements on retranslation of net assets (25.4)

Share of profit after tax 26.6

Impairment of investments (137.2)

Dividends (23.6)

At 31 December 2015                                   300.4

During 2015, trading in the EthosEnergy joint venture, which is part of the Wood Group PSN – Turbine activities segment, was behind plan and it became apparent to the directors in the second half of the year that the business would be unlikely to meet the future profit forecasts which were made when the JV was formed in April 2014, and had previously supported its carrying value.  As a result, an impairment charge of $137.2m has been taken against our investment in EthosEnergy. In addition, the Group has provided $9.3m against a receivable from EthosEnergy which management believes is unlikely to be fully recovered. Both of these items have been treated as exceptional items in the financial statements (see note 4). EthosEnergy has also recognised impairment losses of $12.6m relating to operations which it intends to divest or close during 2016 and this is reflected in the exceptional income line in the table above.     

In arriving at the post impairment carrying value, the directors have established a value in use based on the Group’s share of the joint ventures future expected cash flows. These have been discounted at a pre-tax discount rate of 15%, which is higher than the Group’s weighted average cost of capital to reflect the risks inherent in this business, and the discounted value has been compared to the carrying value of the investment.   In calculating the value in use, the joint venture’s forecasts assume revenue growth into 2016 of 13% and a further 8% into 2017, which is supported by recent contract awards for 2016 and sales pipeline for 2017. In finalising their forecast the directors have added contingency against the profits arising from these contracts to significantly reduce their impact.  The forecasts also assumes working capital inflows of $28m and $42m in 2016 and 2017 respectively, which are supported by recent contract awards and strategic plans to reduce inventory levels and assumes that further overhead cost savings will be delivered in the near term, improving net margins. Longer term growth rates are assumed at 3% which represents our assessment of the long term average growth rates in the markets and countries in which the joint venture operates. If these growth, working capital or cost assumptions are not met then a further impairment may be required in future years.    

A sensitivity analysis was performed on the basis that the expected long-term growth rate falls to 2% and the discount rate is increased by 1% in order to assess the impact of reasonable possible changes to the assumptions used in the impairment review. The sensitivity analysis showed that a 1% reduction in the terminal growth rate

would have resulted in an additional impairment of $13.8m and a 1% increase in the discount rate would have resulted in an additional impairment of $18.9m.

The joint ventures have no significant contingent liabilities to which the Group is exposed, nor has the Group any significant contingent liabilities in relation to its interest in the joint ventures. 

11  Inventories

2015 2014

$m   $m

Materials                            2.9  4.6

Work in progress                     1.6  0.6

Finished goods and goods for resale  3.6  3.9

8.1  9.1

12  Trade and other receivables

Restated

2015     2014

$m       $m

Trade receivables                                     955.0  1,122.5

Less: provision for impairment of trade receivables (39.6)   (47.5)

Trade receivables - net 915.4  1,075.0

Amounts recoverable on contracts 26.1     91.8

Prepayments and accrued income 44.1     60.1

Loans due from joint ventures 104.7    132.4

Restricted cash 26.5     26.5

Other receivables                                      59.2     84.3

Trade and other receivables - current 1,176.0  1,470.1

Long term receivables                                  80.7     79.2

Total receivables 1,256.7  1,549.3

The Group’s trade receivables balance is shown in the table below.

Trade receivables - Gross Provision for impairment Trade receivables - Net Receivable days

31 December 2015 $m                       $m                      $m

Wood Group Engineering                                   347.0                   (27.9)                   319.1              68

Wood Group PSN - Production Services                     608.0                   (11.7)                   596.3              61

Total Group 955.0 (39.6)                   915.4              63

31 December 2014

Wood Group Engineering                                   401.0                   (23.2)                   377.8              59

Wood Group PSN - Production Services                     720.0                   (24.3)                   695.7              58

Wood Group PSN - Turbine activities                        1.5                        -                     1.5             n/a

Total Group 1,122.5 (47.5)                 1,075.0              58

Receivable days are calculated by allocating the closing trade receivables balance to current and prior year revenue including sales taxes.  A receivable days calculation of 63 indicates that closing trade receivables represent the most recent 63 days of revenue. 

A provision for the impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the original receivables.

The ageing of the provision for impairment of trade receivables is as follows:

2015 2014

$m   $m

Up to 3 months 15.0 14.1

Over 3 months  24.6 33.4

39.6 47.5

12  Trade and other receivables (continued)

The movement on the provision for impairment of trade receivables is as follows:

Wood                 Wood Total

Group            Group PSN

Engineering -Production Services

$m                   $m    $m

2015

At 1 January                 23.2                 24.3  47.5

Exchange movements          (0.7)                (0.1) (0.8)

Movement in provision         5.4               (12.5) (7.1)

At 31 December               27.9                 11.7  39.6

2014

At 1 January                 15.3                 10.1  25.4

Exchange movements          (0.5)                (0.1) (0.6)

Movement in provision         8.4                 14.3  22.7

At 31 December               23.2                 24.3  47.5

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

Included within gross trade receivables of $955.0m above (2014: $1,112.5m) are receivables of $172.0m (2014: $230.9m) which were past due but not impaired.  These relate to customers for whom there is no recent history or expectation of default. The ageing analysis of these trade receivables, net of provisions, is as follows:   

2015  2014

$m    $m

Up to 3 months overdue 125.8 163.1

Over 3 months overdue   46.2  67.8

172.0 230.9

The restricted cash of $26.5m (2014: $26.5m) is cash that is subject to an attachment order. The Group cannot access this cash until it receives a release letter from the Courts and as a result the cash balance is presented in receivables. Management believe it is appropriate to include the restricted cash balance in the Group’s net debt figure (see note 26).  2014 comparative figures have been restated to show the restricted cash as a receivable.

13  Cash and cash equivalents

Restated

2015     2014

$m       $m

Cash at bank and in hand 142.9    120.1

Short-term bank deposits  61.6     36.5

204.5    156.6

The effective interest rate on short-term deposits was 0.4% (2014: 0.2%) and these deposits have an average maturity of 13 days (2014: 21 days).

At 31 December 2015, the Group held $10.0m of cash (2014: $10.0m) in its insurance captive subsidiary to comply with local regulatory requirements.

The comparative figure for cash has been restated by $26.5m in relation to the restricted cash referred to in note 12.

14  Trade and other payables

2015  2014

$m    $m

Trade payables                        224.2 297.2

Other tax and social security payable 51.1  54.6

Accruals and deferred income          438.2 548.3

Deferred and contingent consideration   9.2   3.0

Other payables 31.2  66.0

753.9 969.1

15  Borrowings

2015  2014

$m    $m

Bank loans and overdrafts due within one year or on demand

Unsecured 29.9  14.7

Non-current bank loans

Unsecured                                                  120.0 120.0

Senior loan notes

Unsecured 375.0 375.0

Total non-current borrowings                               495.0 495.0

Bank loans are denominated in a number of currencies and bear interest

based on LIBOR or foreign equivalents appropriate to the country in

which the borrowing is incurred.

During 2014, the Group issued US$375.0m of unsecured senior loan notes

in the US private placement market. The notes were issued at a mix of

7, 10 and 12 year maturities at an average fixed rate of 3.74%.

The effective interest rates on the Group's bank borrowings at the

balance sheet date were as follows:

2015  2014

%     %

US Dollar 1.87  1.96

Other 4.37  3.14

The carrying amounts of the Group's borrowings are denominated in the

following currencies:

2015  2014

$m    $m

US Dollar 503.5 499.5

Other 21.4  10.2

524.9 509.7

The Group is required to issue trade finance instruments to certain customers.  These include tender bonds, performance bonds, retention bonds, advance payment bonds and standby letters of credit.  At 31 December 2015, the Group’s bank facilities relating to the issue of bonds, guarantees and letters of credit amounted to $645.0m (2014:  $689.2m).  At 31 December 2015, these facilities were 35% utilised (2014: 49%).

Borrowing facilities

The Group has the following undrawn borrowing facilities available at 31 December:

2015  2014

$m    $m

Expiring within one year             82.0 108.8

Expiring between two and five years 830.0 830.0

912.0 938.8

All undrawn borrowing facilities are floating rate facilities.  The facilities expiring within one year are annual facilities subject to review at various dates during 2016.  The Group was in compliance with its bank covenants throughout the year.  In January 2015, the Group extended its $950m bilateral bank facilities until January 2020.

16  Other non-current liabilities

2015  2014

$m    $m

Deferred and contingent consideration  90.4  40.6

Other payables 110.4  89.1

200.8 129.7

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

17  Financial instruments

The Group’s activities give rise to a variety of financial risks: market risk (including foreign exchange 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 with the Group’s Treasury policies. Group Treasury, together with the Group’s business units identify, evaluate and where appropriate, hedge financial risks.  The Group’s Treasury policies cover specific areas, such as foreign exchange risk, interest rate risk, use of derivative financial instruments and investment of excess cash.

Where the Board considers that a material element of the Group’s profits and net assets are exposed to a country in which there is significant geo-political uncertainty a strategy is agreed to ensure that the risk is minimised.

(a) Market risk

(i) Foreign exchange risk

The Group is exposed to foreign exchange risk arising from various currencies.  The Group has a number of subsidiary companies whose revenue and expenses are denominated in currencies other than the US dollar.  Where possible, the Group's policy is to eliminate all significant currency exposures on revenues at the time of the transaction by using financial instruments such as forward currency contracts.  Changes in the forward contract fair values are booked through the income statement, except where hedge accounting is used in which case the change in fair value is recorded in equity.

The Group does not have any financial instruments in place to hedge foreign currency movements in its balance sheet. However, strategies such as payment of intercompany dividends are used to minimise the amount of net assets exposed to foreign currency revaluation.

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 largest foreign exchange risk relates to movements in the sterling/US dollar exchange rate.  Movements in the sterling/US dollar rate impact the translation of sterling profit earned in the UK and the translation of sterling denominated net assets. The potential impact of changes in the sterling/US dollar exchange rate is summarised in the table below. As the Group reports in US dollars a strengthening of the pound has a positive impact on translation of its sterling companies’ profits and net assets.

17  Financial instruments (continued)

2015 2014

$m   $m

Impact of 10% change to average £/$ exchange rate on profit after tax  6.0 12.3

Impact of 10% change to closing £/$ exchange rate on equity           75.2 72.9

10% has been used in these calculations as it represents a reasonable possible change in the sterling/US dollar exchange rate. The Group also has foreign exchange risk in relation a number of other currencies, in particular, the Australian dollar, the Canadian dollar, the Euro and the Norwegian kroner.

(ii) Interest rate risk

The Group finances its operations through a mixture of retained profits and debt.  The Group borrows in the desired currencies at floating rates of interest and then uses interest rate swaps into fixed rates to generate the desired interest profile and to manage the Group's exposure to interest rate fluctuations.  At 31 December 2015, 80% (2014: 89%) of the Group's bank borrowings were at fixed rates after taking account of interest rate swaps. If the senior loan notes are taken into account the percentage of debt at fixed rate increases to 94%.

The Group is also exposed to interest rate risk on cash held on deposit.  The Group’s policy is to maximise the return on cash deposits whilst ensuring that cash is deposited with a financial institution with a credit rating of ‘A’ or better, where possible.  If average interest rates had been 1% higher or lower during 2015 (2014: 1%), post-tax profit for the year would have been $0.2m lower or higher respectively (2014: $2.7m).  1% has been used in this calculation as it represents a reasonable possible change in interest rates.

(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’s operations comprise Wood Group Engineering and Wood Group PSN, each of which is made up of a number of businesses.  Responsibility for managing credit risks lies within the businesses with support being provided by Group and divisional management where appropriate. In 2015, the Group issued a new Group credit risk policy to enhance and improve existing controls. There is significant management focus on receivables in the current challenging market.

A customer evaluation is typically obtained from an appropriate credit rating agency.  Where required, appropriate trade finance instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk. 

The Group’s major customers are typically large companies which have strong credit ratings assigned by international credit rating agencies.  Where a customer does not have sufficiently strong credit ratings, alternative forms of security such as the trade finance instruments referred to above may be obtained. 

The Group has a broad customer base and management believe that no further credit risk provision is required in excess of the provision for impairment of trade receivables. 

Management review trade receivables across the Group based on receivable days calculations to assess performance.    A table showing trade receivables and receivable days is provided in note 12.  Receivable days calculations are not provided on non-trade receivables as management do not believe that this information is a relevant metric. 

The Group also has credit risk in relation to cash held on deposit.  The Group’s policy is to deposit cash at institutions with a credit rating of ‘A’ or better where possible.  100% of cash held on deposit at 31 December 2015 (2014: 100%) was held with such institutions.

17  Financial instruments (continued)

(c) Liquidity risk

With regard to liquidity, the Group’s main priority is to ensure continuity of funding. At 31 December 2015, 94% (2014: 97%) of the Group’s borrowings (including senior loan notes) were due to mature in more than one year.  Based on the current outlook the Group has sufficient funding in place to meet its future obligations.

During 2014, the Group issued US$375m of unsecured senior loan notes in the US private placement market. The notes were issued at a mix of 7, 10 and 12 year maturities. In January 2015, the Group extended its bilateral facilities of $950m to January 2020.

(d) Capital risk

The Group seeks to maintain an optimal capital structure.  The Group monitors its capital structure on the basis of its gearing ratio, interest cover and when applicable, the ratio of net debt to EBITDA. These ratios are calculated using the proportionally consolidated figures used for management reporting.

Gearing is calculated by dividing net debt by equity attributable to owners of the parent.  Gearing at 31 December 2015 was 12.1% (2014: 11.6%).

Interest cover is calculated by dividing total EBITA by net finance expense.  Interest cover for the year to 31 December 2015 was 20.3 times (2014: 22.7 times).

The ratio of net debt to total EBITDA at 31 December 2015 was 0.55 (2014: 0.48).

Financial liabilities

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date.  The amounts disclosed in the table are the contractual undiscounted cash flows.  Drawdowns under the bilateral bank facilities are for periods of three months or less and therefore loan interest payable is excluded from the amounts below.

Less than 1 year Between 1 and 2 years Between    Over

$m                    $m 2 and 5 years $m 5 years

At 31 December 2015                                                                        $m

Borrowings                                43.9                  14.0            162.1   429.7

Trade and other payables 702.8                     -                -       -

Other non-current liabilities -                  55.0            151.2       -

At 31 December 2014

Borrowings                     28.7 14.0 162.1 447.5

Trade and other payables      914.5 -    - -

Other non-current liabilities     - 37.8  94.2 -

17  Financial instruments (continued)

Fair value of non-derivative financial assets and financial liabilities

The fair value of short-term borrowings, trade and other payables, trade and other receivables, short-term deposits and cash at bank and in hand approximates to the carrying amount because of the short maturity of interest rates in respect of these instruments.  Drawdowns under long-term bank facilities are for periods of three months or less and as a result, book value and fair value are considered to be the same.

Details of derivative financial instruments are not disclosed in the financial statements as they are not material.

Deferred and contingent consideration

Deferred and contingent consideration is payable on the acquisition of businesses based on earn out arrangements and is initially recognised at fair value. The amount payable is dependent on the post-acquisition profits of the acquired entities and the provision made is based on the Group’s estimate of the likely profits of those entities. Where deferred and contingent consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest. The fair value of contingent consideration is not based on observable market data and as such the valuation method is classified as level 3 under IFRS 13. The process for valuation is consistently applied to all acquisitions.

18  Provisions

Warranty provisions Other provisions

Total

$m               $m     $m

At 1 January 2015 33.7             44.4   78.1

Exchange movements                         (1.9)            (1.4)  (3.3)

Charge to income statement 1.3             45.7   47.0

Released to income statement (5.1)           (21.9) (27.0)

At 31 December 2015 28.0             66.8   94.8

Warranty provisions

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

Other provisions

At 31 December 2015, other provisions of $66.8m (2014: $44.4m) have been recognised.  This amount includes provisions for non-recoverable indirect taxes, provisions for legal claims, including claims in relation to inspection and maintenance services in the US and provisions relating to the divestment of businesses.  It is expected that any payment required in respect of these provisions would be made within the next two years.

19  Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using the tax rate applicable to the territory in which the asset or liability has arisen. The UK rate of corporation tax, currently 20%, will reduce to 19% in April 2017 and 18% in April 2020.  The Group has provided deferred tax in relation to UK companies at 19.5% (2014: 20%).  The movement on the deferred tax account is shown below:

2015   2014

$m     $m

At 1 January (58.4) (28.2)

Exchange movements 1.8    2.4

Credit to income statement (note 5)                                       (12.9) (31.7)

Acquisitions (note 27) 7.5    5.9

Disposals                                                                      -    1.3

Reclassification from current tax 6.1      -

Deferred tax relating to retirement benefit liabilities                      4.9  (3.3)

Deferred tax relating to share option schemes                              (5.5)    6.3

Deferred tax relating to foreign exchange on net investment in subsidiary      - (11.1)

At 31 December (56.5) (58.4)

Deferred tax is presented in the financial statements as follows:

Deferred tax assets (62.5) (62.3)

Deferred tax liabilities 6.0    3.9

(56.5) (58.4)

19 Deferred tax (continued)

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries and joint ventures.  As these earnings are continually reinvested by the Group, no tax is expected to be payable on them in the foreseeable future.

The Group has unrecognised tax losses of $140.6m (2014: $93.7m) to carry forward against future taxable income. Tax losses are recognised where there is reasonable certainty that they can be utilised in future years.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

The deferred tax balances are analysed below:-

Accelerated tax depreciation Pension Share based charges Short term timing differences Losses  Total

2015 $m      $m                  $m                            $m     $m $m

49.7       -              (14.3)                        (71.8)        (62.5)

Deferred tax assets (26.1)

-     0.9                   -                           5.1           6.0

Deferred tax liabilities -

49.7     0.9              (14.3)                        (66.7)        (56.5)

Net deferred tax asset (26.1)

2014

44.5 (5.4) (10.7) (90.3)       (62.3)

Deferred tax assets (0.4)

-     - -    3.9          3.9

Deferred tax liabilities -

44.5 (5.4) (10.7) (86.4)       (58.4)

Net deferred tax asset (0.4)

20  Share based charges

The Group currently has a number of share schemes that give rise to share based charges.  These are the Executive Share Option Scheme (‘ESOS’), the Long Term Retention Plan (‘LTRP’), the Long Term Incentive Plan (‘LTIP’), the Long Term Cash Incentive Plan (‘LTCIP’) and the Long Term Plan (‘LTP’). The LTP replaced the LTRP, LTIP and LTCIP in 2013.  The charge to operating profit in 2015 for these schemes amounted to $12.3m (2014: $17.4m). $12.7m (2014: $18.2m) relating to the charge has been credited to retained earnings and $0.4m (2014: $0.8m) has been deducted from liabilities reflecting a credit to operating profit for the year in respect of true-ups to the LTCIP, which is a cash settled scheme.

The assumptions made in arriving at the charge for each scheme are detailed below.

ESOS and LTRP

For the purposes of calculating the fair value of the share options, a Black-Scholes option pricing model has been used.  Based on past experience, it has been assumed that options will be exercised, on average, six months after the earliest exercise date, which is four years after grant date, and there will be a lapse rate of between 20% for ESOS and 25% for LTRP. The share price volatility used in the calculation of 40% is based on the actual volatility of the Group’s shares since IPO as well as that of comparable companies.  The risk free rate of return is based on the implied yield available on zero coupon gilts with a term remaining equal to the expected lifetime of the options at the date of grant.

Long Term Incentive Plan

The Group’s Long Term Incentive Plan (‘LTIP’) was in place from 2008 to 2012.  Under this Scheme, the executive directors and certain senior executives were awarded shares or share options dependent upon the achievement of performance targets established by the Remuneration Committee.  The performance measures for the LTIP were EBITA, OCER (ratio of operating capital employed to revenue), total shareholder return and adjusted diluted earnings per share.  The LTIP awards are in the form of shares or share options and forfeitable restricted shares or share options.  20% of any award earned over the three year performance cycle is deferred for a further two years in the form of forfeitable restricted shares or share options.

Long Term Plan

The Group’s Long Term Plan (‘LTP’) was introduced during 2013 to replace the LTRP, LTIP and LTCIP.  Two distinct awards will be made under LTP.  Nil value share options will be awarded on the same basis as awards under the LTRP (see above).  Awards to former LTIP and LTCIP participants will be made on a broadly similar basis to LTIP with the performance measures being EBITA, total shareholder return and adjusted diluted earnings per share.  Participants may be granted conditional share awards or nil cost options at the start of the cycle. Performance is measured over a three year period and up to 80% of an award may vest based on the performance over that period. The vesting of at least 20% of any award is normally deferred for a further period of at least two years. 

Performance based awards

Details of the LTIP/LTP awards are set out in the table below. The charge for market related performance targets has been calculated using a Monte Carlo simulation model taking account of share price volatility against peer group companies, risk free rate of return, dividend yield and the expected lifetime of the award.  Further details of the LTIP/LTP are provided in the Directors’ Remuneration Report.

Cycle 4        Cycle 5 Cycle 6 (LTP)   Cycle 7 Cycle 8 (LTP)

(LTIP)         (LTIP)                   (LTP)

Performance period             2011-13        2012-14       2013-15 2014-16       2015-17

Fair value of awards             £5.10          £6.18         £7.53     £7.26         £5.95

Type of award           Shares/options Shares/options       Options   Options Options

Outstanding at 31/12/15        190,172        171,339     1,811,688 2,124,052     3,218,309

20  Share based charges (continued)

The awards outstanding under cycles 4 and 5 represent 20% of the award at vesting which is deferred for two years.

Further details on the LTP are provided in the Directors’ Remuneration Report.

LTCIP

The share based charge for the LTCIP for cycle 4 and 5 was calculated using a fair value of £5.95.  The fair value is calculated using a Black-Scholes option pricing model using similar assumptions to those used for ESOS and LTRP above. 

Share options

A summary of the basis for the charge for ESOS, LTRP and LTP options is set out below together with the number of options granted, exercised and lapsed during the year.             

ESOS                LTRP                  LTP

2015      2014      2015 2014        2015      2014

Number of participants                               735     1,002 215       442         291       293

Lapse rate 25%       25%       20% 20%      10-20%       20%

Risk free rate of return on grants during year N/A     1.55%       N/A         - 1.09%-1.14%     1.55%

Share price volatility 40%       40%       40% 40%         40%       40%

Dividend yield on grants during year N/A     1.78%       N/A         - 2.69%     1.78%

Fair value of options granted during year N/A     £2.27       N/A         - £5.25-5.91     £7.03

Weighted average remaining contractual life    6.3 years 6.9 years 1.7 years 2.3 years   3.3 years 4.3 years

Options outstanding 1 January     6,868,494 8,736,827 1,845,558 3,421,120   962,396   11,500

Options granted during the year           -   1,166,552         -           - 565,769  973,000

Options exercised during the year (858,478) (1,872,405) (564,319) (1,139,828)   (9,405) -

Options lapsed during the year    (701,422) (1,162,480) (174,253)   (435,734)  (96,896) (22,104)

Options outstanding 31 December   5,308,594   6,868,494 1,106,986   1,845,558 1,421,864  962,396

No. of options exercisable at 31 December

1,976,732 1,612,803 111,000 160,552 - -

Weighted average share price of options exercised during year

£6.69     £7.67   £6.26 £7.48 £6.16 -

20  Share based charges (continued)

Executive Share Option Schemes

The following options to subscribe for new or existing shares were outstanding at 31 December:

Number of ordinary  Exercise price

Year of shares under option

Grant        2015      2014 (per share) Exercise period

2006       25,000 35,000          265¼p       2010-2016

2007       27,000 44,000          268½p       2011-2017

2008       42,000 77,658          381¾p       2012-2018

2008        5,000     8,986          354?p       2012-2018

2009      325,113 499,621           222p       2013-2019

2009        5,000 25,000          283?p       2013-2019

2010      571,152 922,538          377½p       2014-2020

2011      926,467 1,309,192          529½p 2015-2021

2012    1,093,308 1,313,636          680½p       2016-2022

2012        2,500     5,000           802p       2016-2022

2013    1,239,243 1,482,019          845?p       2017-2023

2013        4,000     4,000           812p       2017-2023

2014    1,042,811 1,141,844          767?p       2018-2024

5,308,594 6,868,494

Details of the Group’s Executive Share Option Schemes are set out in the Directors’ Remuneration Report.  Share options are granted at an exercise price equal to the average mid-market price of the shares on the three days prior to the date of grant.

Long Term Retention Plan

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

Year of Number of ordinary  Exercise price

shares under option

Grant        2015      2014 (per share) Exercise period

2010            - 160,552            3?p       2014-2015

2011            - 71,563            3?p       2015-2016

2011      111,000 394,799          42/7p       2015-2016

2012      459,469 583,811          42/7p       2016-2017

2013      536,517 634,833          42/7p       2017-2018

1,106,986 1,845,558

Options are granted under the Group’s LTRP at par value.  The basis of the scheme is that an overall bonus pool is calculated annually based on performance criteria that consider the growth in the Group’s adjusted earnings per share in the prior year.  There are no performance criteria attached to the exercise of options under the LTRP. Further details on the LTRP are provided in the Directors’ Remuneration Report.

20  Share based charges (continued)

Nil value share options

The following options granted under the Group’s LTP were outstanding at 31 December:

Year of     Number of     Exercise price

ordinary shares

under option

Grant        2015 2014    (per share) Exercise period

2013       11,500 11,500          0.00p       2017-2018

2014      844,595 950,896          0.00p       2018-2019

2015      330,769       - 0.00p       2017-2018

2015      235,000       -          0.00p       2019-2020

1,421,864 962,396

Options are granted under the Group’s LTP at nil value.  There are performance criteria relating to the creation of the pool available but none relating to the exercise of the options.  Further details on the LTP are provided in the Directors’ Remuneration Report.

21  Share capital

2015             2014

Ordinary shares of 42/7 pence each (2014: 42/7 pence)

Issued and fully paid shares   $m      shares $m

At 1 January 376,975,384 23.7 375,075,384 23.6

Allocation of new shares to employee share trusts 1,900,000  0.1   1,900,000 0.1

At 31 December 378,875,384 23.8 376,975,384 23.7

22  Share premium

2015 2014

$m $m

At 1 January 56.0 56.0

Allocation of new shares to employee share trusts 7.9    -

At 31 December 63.9 56.0

The shares allocated to the trust during the year were issued at 4²/₇ pence and 529½ pence (2014: 4²/₇ pence).

23  Retained earnings

2015    2014

$m      $m

At 1 January 2,142.8 1,856.6

Profit for the year attributable to owners of the parent                   79.0   322.0

Dividends paid (note 6) (104.9)  (87.2)

Credit relating to share based charges (note 20)                           12.7    19.5

Re-measurement gain/(loss) on retirement benefit liabilities (note 29)     24.9 (16.5)

Movement in deferred tax relating to retirement benefit liabilities       (4.9) 3.3

Shares allocated to employee share trusts                                 (8.0)   (0.1)

Shares disposed of by employee share trusts 5.6    11.2

Tax credit relating to share option schemes                                 7.5     1.8

Tax credit relating to foreign exchange on net investment in subsidiary       - 15.0

Transactions relating to joint ventures and non-controlling interests         - 8.5

Exchange movements in respect of shares held by employee share trusts       7.7 8.7

At 31 December 2,162.4 2,142.8

Retained earnings are stated after deducting the investment in own shares held by employee share trusts.  No options have been granted over shares held by the employee share trusts (2014: nil).

Shares held by employee share trusts

2015               2014

Shares    $m      Shares $m

Balance 1 January                                                9,489,797 139.1  11,640,553 158.9

New shares allocated 1,900,000   8.0   1,900,000 0.1

Shares issued to satisfy option exercises                      (1,432,202) (5.6) (3,012,233) (11.2)

Shares issued to satisfy awards under Long Term Incentive Plan

(972,272)     - (1,038,523)      -

Exchange movement - (7.7)           -  (8.7)

Balance 31 December 8,985,323 133.8   9,489,797  139.1

Shares acquired by the employee share trusts are purchased in the open market using funds provided by John Wood Group PLC to meet obligations under the Employee Share Option Schemes, LTRP, LTIP and LTP. Shares are allocated to the employee share trusts in order to satisfy future option exercises at various prices.

The costs of funding and administering the trusts are charged to the income statement in the period to which they relate.  The market value of the shares at 31 December 2015 was $81.1m (2014: $88.3m) based on the closing share price of £6.13 (2014: £5.96).  The employee share trusts have waived their rights to receipt of dividends on ordinary shares.       

24  Other reserves                                        

Capital reduction Capital redemption reserve Currency translation reserve Hedging   Total

reserve reserve

$m                         $m                           $m      $m $m

At 1 January 2014 88.1 439.7                       (55.8)   (0.8) 471.2

Exchange movements on retranslation of foreign currency net assets

-                          -                      (147.4)       - (147.4)

Cash flow hedges -                          -                            -   (0.1) (0.1)

At 31 December 2014 88.1 439.7                      (203.2)   (0.9) 323.7

Exchange movements on retranslation of foreign currency net assets

-                          -                      (175.4)       - (175.4)

Cash flow hedges                                                   - - -   (0.1)   (0.1)

At 31 December 2015 88.1 439.7                      (378.6)   (1.0) 148.2

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 movement during the year relates to the retranslation of foreign currency net assets, including goodwill and intangible assets recognised on acquisition. 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.

25  Non-controlling interests

2015  2014

$m    $m

At 1 January                                       13.1 8.9

Exchange movements (0.5) (0.3)

Share of profit for the year 11.1  14.3

Dividends paid to non-controlling interests (1.0) (7.7)

Other transactions with non-controlling interests - (2.1)

At 31 December 22.7  13.1

26  Cash generated from operations

Restated

2015     2014

Note      $m       $m

Reconciliation of operating profit to cash generated from

operations:

Operating profit from continuing operations                      159.4    497.4

Less share of post-tax profit from joint ventures               (26.6)   (30.0)

132.8    467.4

Operating profit/(loss) from discontinued operations              10.4   (27.3)

143.2    440.1

Adjustments for:

Depreciation 1    48.8     46.3

Loss on disposal of property plant and equipment             3     4.0 6.2

Amortisation of intangible assets 1   107.1     98.9

Share based charges 20    12.3     22.2

Increase in provisions                                      18    27.0 7.5

Dividends from joint ventures                               10    23.6 20.3

Exceptional items - non cash impact 1   149.8     23.5

Changes in working capital (excluding effect of

acquisition and divestment of subsidiaries)

Increase in inventories (0.6)    (5.2)

Decrease/(increase) in receivables 333.8  (100.0)

Decrease in payables (274.0)    (0.8)

Exchange movements                                              (12.1)   (14.1)

Cash generated from operations                                   562.9    544.9

Analysis of net debt

At 1 January   Cash Exchange movements At 31 December

2015   flow                              2015

$m     $m                 $m             $m

Cash and cash equivalents        156.6   62.4             (14.5)          204.5

Restricted cash                   26.5      -                  -           26.5

Short-term borrowings           (14.7) (15.7)                0.5         (29.9)

Long-term borrowings           (495.0)      -                  -        (495.0)

Net debt                       (326.6) 46.7             (14.0)        (293.9)

Net cash of $3.6m (2014: $30.9m) was held by joint ventures at 31 December.

The restricted cash of $26.5m (2014: $26.5m) is cash that is subject to an attachment order. The Group cannot access this cash until it receives a release letter from the Courts and as a result the cash balance is presented in receivables. Management believe it is appropriate to include the restricted cash balance in the Group’s net debt figure. 

27  Acquisitions

The assets and liabilities acquired in respect of business combinations were as follows:

Infinity        Group

Other  Total

$m     $m $m

Property plant and equipment                                 10.0    9.1 19.1

Intangible assets recognised on acquisition                  45.0   32.4 77.4

Other intangible assets                                         -    0.5 0.5

Trade and other receivables                                  93.4   58.0 151.4

Cash and cash equivalents                                    10.3    8.2 18.5

Trade and other payables                                   (20.0) (43.0) (63.0)

Deferred tax -  (7.5)  (7.5)

Total identifiable net assets acquired                      138.7   57.7 196.4

Goodwill 52.9   83.0  135.9

Consideration 191.6  140.7  332.3

Consideration satisfied by:

Cash 165.7   90.8  256.5

Deferred and contingent consideration 25.9   49.9 75.8

191.6  140.7  332.3

The Group has used acquisition accounting for the purchases and, in accordance with the Group’s accounting policies, the goodwill arising on consolidation of $135.9m has been capitalised. The table reflects payments in respect of deferred and contingent consideration made in relation to acquisitions in prior periods.

In June, the Group acquired 100% of the share capital of Beta Machinery Analysis, a Calgary-based engineering consultancy specialising in advanced vibration analysis. In September, the Group acquired 100% of the share capital of the Automated Technology Group, an independent supplier of control and power solutions for industrial automation in the UK. In December, the Group acquired 100% of the share capital of the Infinity Group, an industrial construction and maintenance contractor serving the petrochemical, refining and gas processing sectors in the Texas Gulf Coast and 100% of the share capital of Kelchner Inc, a US based provider of construction and energy field services.

Contingent consideration has been provided in relation to all four of the acquisitions and is payable over the next three years. The amount payable is dependent on the post-acquisition profits of the acquired entities and the provision made is based on the Group’s estimate of the likely profits of those entities. Where deferred consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest.

Due to its size, the acquisition of the Infinity Group is considered material and has been presented separately in the table above. The other acquisitions are not considered to be material on an individual basis and therefore have been aggregated above.

The acquired companies will be in a position to access the Group’s wider client base and use the Group’s resources to further grow and develop their businesses.  The acquisitions expand the Group’s existing service lines and provide increased diversification and entry into new markets. These factors contribute to the goodwill recognised on the acquisitions.

The acquisition of Infinity gives the Group access to the downstream market and provides a platform to grow geographically into other US markets.

27  Acquisitions (continued)

Intangible assets of $77.4m, representing the fair value of customer contracts and relationships, have been recorded in relation to the acquisitions made in the year. Provisional fair value adjustments of $11.5m have also been recorded. Trade and other receivables acquired of $151.4m are expected to be recovered in full. The accounting for these acquisitions will be finalised in the next accounting period. No deferred tax has been recognised on the Infinity acquisition as for tax purposes the transaction is treated as an asset purchase.

Acquisition costs incurred in relation to the companies acquired during the year are included in administrative expenses in the income statement.

The outflow of cash and cash equivalents in respect of acquisitions is analysed as follows:

$m

Cash consideration  256.5

Cash acquired      (18.5)

Cash outflow        238.0

Included in the cash outflow above are contingent consideration payments of $4.1m made during the year in respect of acquisitions made in prior periods. Deferred and contingent consideration payments were reassessed during the year resulting in the release of $19.0m to the income statement. Total deferred and contingent consideration outstanding at 31 December amounted to $99.6m (2014: $43.6m).   

The results of the Group, as if the above acquisitions had been made at the beginning of period, are presented in the table below. Note that total revenue and EBITA includes share of joint venture revenue and EBITA and is consistent with the presentation in note 1.

$m

Total Revenue 6,312.4

Total EBITA     510.2

From the date of acquisition to 31 December 2015, the acquisitions contributed $21.2m to revenue and $3.4m to EBITA.

28  Employees and directors           

Employee benefits expense 2015    2014

$m      $m

Wages and salaries                                     2,367.9 2,905.6

Social security costs                                    210.7   240.6

Pension costs - defined benefit schemes (note 29)            -     3.5

Pension costs - defined contribution schemes (note 29)    78.8 89.6

Share based charges 12.3    17.4

2,669.7 3,256.7

Employee benefits expense includes both continuing and discontinued operations.

Average monthly number of employees (including executive directors)   2015 2014

No.    No.

By geographical area:

UK 8,907  9,512

US                                                                  10,082 12,409

Rest of the World 9,186 10,019

28,175 31,940

The average number of employees excludes contractors and employees of joint venture companies.

2015 2014

Key management compensation                            $m   $m

Salaries and short-term employee benefits 8.5  8.4

Amounts receivable under long-term incentive schemes 1.3  1.6

Social security costs 0.8  1.1

Post-employment benefits 0.6  0.4

Share based charges 1.3  2.6

12.5 14.1

Key management compensation represents the charge to the income statement in respect of the remuneration of the Group board and Group Executive Leadership Team members.

2015 2014

Directors $m   $m

Aggregate emoluments 4.3  5.0

Aggregate amounts receivable under long-term incentive schemes  0.6 1.0

Aggregate gains made on the exercise of share options           0.7 1.4

Share based charges 0.6  1.7

6.2  9.1

At 31 December, two directors (2014: three) had retirement benefits accruing under a defined contribution pension plan and no directors (2014: none) had benefits accruing under the Group’s defined benefit pension scheme. Further details of directors’ emoluments are provided in the Directors’ Remuneration Report.

29  Retirement benefit scheme surplus/deficit

The Group operates a defined benefit pension scheme in the UK, the John Wood Group PLC Retirement Benefits Scheme, which is contracted out of the State Scheme, and a number of defined contribution plans.  The assets of the defined benefits scheme are held separately from those of the Group, being invested with independent investment companies in trustee administered funds. On 30 June 2014, the scheme was closed to future accrual.

The most recent actuarial valuation of the scheme was carried out at 5 April 2013 by a professionally qualified actuary.  The Group has agreed to pay deficit reduction contributions of £1.7m per annum until 2021, although this will be reviewed at the time of the next actuarial valuation. As a result of the actuarial gains arising during the year, the scheme is in surplus at 31 December 2015. Management believe that the Group will benefit from the surplus and any future funding and an asset has therefore been recognised in the Group balance sheet.

At 31 December 2015, there were no active members (2014: nil), 370 pensioners (2014: 330) and 774 deferred members (2014: 837) of the scheme.

The principal assumptions made by the actuaries at the balance sheet date were:

2015 2014

%    %

Discount rate 3.9  3.6

Rate of increase in pensions in payment and deferred pensions  3.2 3.1

Rate of retail price index inflation                           3.2  3.1

Rate of consumer price index inflation                         2.2  2.3

At 31 December 2015, the mortality assumption used to determine pension liabilities is based on the most recent mortality tables which consider UK wide mortality data relevant to the Group’s pension scheme.  The mortality rates are then adjusted to allow for expected future improvements in mortality using up to date projections. The mortality assumption used a base table of PXA00­ with future improvements in line with CMI_2012 (1.25%).

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

2015    2014

$m      $m

Present value of funded obligations (249.7) (293.1)

Fair value of scheme assets 254.2   266.1

Net surplus/(deficit) 4.5  (27.0)

The major categories of scheme assets as a percentage of total scheme assets are as follows:

2015  2015 2014  2014

$m     % $m     %

Equity securities 206.9  81.4 201.4  75.7

Corporate bonds    24.9   9.8 18.4   6.9

Gilts              13.2 5.2  19.4   7.3

Annuity policies    6.4   2.5 7.2   2.7

Cash                2.8   1.1 19.7   7.4

254.2 100.0 266.1 100.0

29  Retirement benefit surplus/deficit (continued)

The amounts recognised in the income statement are as follows:

2015   2014

$m     $m

Current service cost included within employee benefits expense     - 3.5

Past service gain -  (6.7)

Interest cost 10.1   12.0

Interest income on scheme assets                               (9.2) (10.2)

Total included within finance expense                            0.9    1.8

The employee benefits expense and past service gain are included within administrative expenses in the income statement.

Changes in the present value of the defined benefit liability are as follows:

2015   2014

$m     $m

Present value of funded obligations at 1 January                          293.1  267.1

Current service cost -    3.5

Past service gain -  (6.7)

Interest cost 10.1   12.0

Re-measurements:

- actuarial (gains)/losses arising from changes in financial assumptions (15.1)   37.5

- actuarial (gains)/losses arising from changes in experience             (3.1)    7.0

Benefits paid                                                            (15.6)  (9.2)

Settlement of unfunded liability (4.7)      -

Exchange movements (15.0) (18.1)

Present value of funded obligations at 31 December                        249.7  293.1

At 31 December 2015, the present value of funded obligations comprised $175.0m relating to deferred members and $74.7m relating to pensioners.

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

2015   2014

$m     $m

Fair value of scheme assets at 1 January 266.1  225.9

Interest income on scheme assets 9.2   10.2

Contributions                                 2.5   28.0

Benefits paid (15.6)  (9.2)

Expenses paid (0.1)  (0.5)

Re-measurement gain on scheme assets          6.7   28.0

Exchange movements                         (14.6) (16.3)

Fair value of scheme assets at 31 December 254.2  266.1

29  Retirement benefit scheme surplus/deficit (continued)

Analysis of the movement in the balance sheet (surplus)/deficit:

2015   2014

$m     $m

Liability at 1 January 27.0   41.2

Current service cost -    3.5

Past service gain                                         -  (6.7)

Finance expense 0.9    1.8

Contributions                                         (2.5) (28.0)

Expenses paid                                           0.1    0.5

Re-measurement (gains)/losses recognised in the year (24.9) 16.5

Settlement of unfunded liability (4.7)      -

Exchange movements (0.4)  (1.8)

(Surplus)/deficit at 31 December (4.5)   27.0

The contributions expected to be paid during the financial year ending 31 December 2016 amount to $2.5m (£1.7m).

Scheme risks

The retirement benefit scheme is exposed to a number of risks, the most

significant of which are -

Volatility

The defined benefit obligation is measured with reference to corporate bond yields and if scheme assets underperform relative to this yield, this will create a deficit, all other things being equal.  The scheme investments are well diversified such that the failure of a single investment would not have a material impact on the overall level of assets.

Changes in bond yields

A decrease in corporate bond yields will increase the defined benefit obligation.  This would however be offset to some extent by a corresponding increase in the value of the scheme’s bond asset holdings.

Inflation risk

The majority of benefits in deferment and in payment are linked to price inflation so higher actual inflation and higher assumed inflation will increase the defined benefit obligation.

Life expectancy

The defined benefit obligation is generally made up of benefits payable for life and so increases to members’ life expectancies will increase the defined benefit obligation, all other things being equal.

Sensitivity of the retirement benefit obligation

The impact of changes to the key assumptions on the retirement benefit obligation is shown below. The sensitivity is based on a change in an assumption whilst holding all other assumptions constant.  In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.  When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension obligation recognised in the Group balance sheet.

Assumption                             Change Impact on obligation

Discount rate                            0.1%                $4.7m

Rate of retail prices index inflation    0.1%                $2.8m

Rate of consumer price index inflation 0.1%                $1.3m

Life expectancy                        1 year                $6.6m

29  Retirement benefit scheme surplus/deficit (continued)

Defined contribution plans

Pension costs for defined contribution plans were as follows:

2015 2014

$m   $m

Defined contribution plans 78.8 89.6

There were no material contributions outstanding at 31 December 2015 in respect of defined contribution plans.

The Group operates a pension arrangement in the US for certain employees. During the year, the Group made contributions of $0.8m (2014: $0.9m) to the arrangement. Contributions are invested in a portfolio of US funds and the fair value of the funds at the balance sheet date are recognised by the Group as a long term receivable. Investments held by the Group at 31 December amounted to $75.5m (2014: $71.7m) and will be used to pay benefits when employees retire.  The corresponding liability is recorded in other non-current liabilities.

30  Operating lease commitments – minimum lease payments

Property 2015 Vehicles, plant and equipment Property 2014 Vehicles, plant and equipment

$m $m       $m                                 $m

Amounts payable under non-cancellable operating leases due:

Within one year                                                 78.4                                9.3     87.8                               17.7

Later than one year and less than five years                   251.7                               11.4    268.1                               14.5

After five years 232.2 -    188.2                                  -

562.3 20.7    544.1                               32.2

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

31  Contingent liabilities

At the balance sheet date, the Group had cross guarantees without limit extended to its principal bankers in respect of sums advanced to subsidiaries.

From time to time, the Group is notified of claims in respect of work carried out. Where management believes we are in a strong position to defend these claims no provision is made. 

The Group is aware of potential legal challenges which may affect historic and future employment costs and may have an impact on the Group. At this point it is not possible to make a reliable estimate of the liability, if any, that may arise and therefore no provision has been made.

32  Capital and other financial commitments

2015 2014

$m   $m

Contracts placed for future capital expenditure not provided in the  5.0 5.8

financial statements

The capital expenditure above relates to property plant and equipment.  In addition, joint venture companies have commitments amounting to $1.0m.

33  Related party transactions

The following transactions were carried out with the Group’s joint ventures.  These transactions comprise sales and purchases of goods and services and funding provided in the ordinary course of business.  The receivables include loans to certain joint venture companies.

2015  2014

$m    $m

Sale of goods and services to joint ventures 47.6  57.5

Purchase of goods and services from joint ventures 11.6  15.6

Receivables from joint ventures 147.0 181.0

Payables to joint ventures 18.6  27.6

Key management compensation is disclosed in note 28.

34  Subsidiaries and joint ventures

The Group’s related undertakings at 31 December 2015 are listed below.  All subsidiaries are fully consolidated in the financial statements. Ownership interests reflect holdings of ordinary shares.

Name of subsidiary or joint     Country of incorporation or Ownership interest %

venture                         registration

AG Offshore Engineering (China) China                                       100%

Ltd

Altablue Australia Pty Ltd      Australia                                   100%

Altablue Inc.                   United States                               100%

AltaBlue Limited                Jersey                                      100%

Australian Skills Training Pte. Singapore                                   100%

Ltd.

Automated Technology Group      United Kingdom                              100%

Holdings Limited

Autotech Controls Limited       United Kingdom                              100%

Baker Energy International      Equatorial Guinea                            65%

Equatorial Guinea S.A.

Beta Machinery Analysis Ltd.    Canada                                      100%

BMA Engineering Sdn. Bhd.       Malaysia                                    100%

BMA Global Ltd.                 Canada                                      100%

BMA Investments Ltd.            Canada                                      100%

BMA Services, Inc.              United States                               100%

BMA Solutions L.P.              United States                               100%

Brazos M&E (Nevada), Inc        United States                               100%

Brazos M&E Ltd                  United States                               100%

Brazos M&E Management, LLC      United States                               100%

Caliber Holding, Inc            United States                               100%

Caliber Services, LP            United States                               100%

Cape Software, Inc.             United States                               100%

CSGP, LLC                       United States                               100%

Dockside Services (Devonport)   United Kingdom                               48%

Limited

Eagle Pipeline Construction,    United States                               100%

Inc.

East Mediterranean Energy       United Kingdom                              100%

Services Limited

Elkhorn Construction, Inc.      United States                               100%

Elkhorn Holdings, Inc.          United States                               100%

Energy Logistics, Inc.          United States                                33%

Erbus AS                        Norway                                      100%

Ethos Energy Group Limited      United Kingdom                               51%

EthosEnergy Sp ZOO              Poland                                       41%

EthosEnergy (Abu Dhabi) L.L.C.  United Arab Emirates                         25%

EthosEnergy (Canada), Ltd       Canada                                       51%

EthosEnergy (GBR) Limited       United Kingdom                               51%

EthosEnergy (MEA) Limited       United Kingdom                               51%

EthosEnergy (Middle East)       United Kingdom                               51%

Limited

EthosEnergy (USA), LLC          United States                                51%

EthosEnergy Accessories and     United States                                51%

Components, LLC

EthosEnergy AG                  Switzerland                                  51%

EthosEnergy Australia Pty Ltd   Australia                                    51%

EthosEnergy B.V.                Netherlands                                  51%

EthosEnergy Component Repair,   United States                                51%

LLC

EthosEnergy de Colombia SAS     Colombia                                     51%

EthosEnergy de Mexico SA de CV  Mexico                                       51%

EthosEnergy Field Services, LLC United States                                51%

EthosEnergy GmbH                Germany                                      51%

EthosEnergy GTS Holdings (US),  United States                                51%

LLC

EthosEnergy Holdings (Ireland)  Ireland                                      51%

Limited

EthosEnergy International       Jersey                                       51%

Limited

EthosEnergy Investments Limited United Kingdom                               51%

EthosEnergy Italia SpA          Italy                                        51%

EthosEnergy Light Turbines      United Kingdom                               51%

Limited

EthosEnergy Light Turbines, LLC United States                                51%

EthosEnergy Oman Limited        Jersey                                       51%

EthosEnergy Overseas Limited    United Kingdom                               51%

EthosEnergy Peru S.A.C.         Peru                                         51%

EthosEnergy Poland Spolka       Poland                                       51%

Akcyjna

EthosEnergy Power Operations    United States                                51%

(Freeport), LLC

EthosEnergy Power Operations    United States                                51%

(West), LLC

EthosEnergy Power Plant         United States                                51%

Services, LLC

EthosEnergy Power Solutions,    United States                                51%

LLC

EthosEnergy TC Inc              United States                                51%

EthosEnergy Thailand Limited    Thailand                                     46%

EthosEnergy US Group Inc.       United States                                51%

EthosEnergy US Holdings Limited United Kingdom                               51%

EthosEnergy USA Holdings Inc.   United States                                51%

Feng Neng Sgurr (Beijing)       China                                        75%

Renewable Energy Technology Co.

Ltd

Garlan Insurance Limited        Guernsey                                    100%

Gas Turbine Efficiency AB       Sweden                                       51%

Gas Turbine Efficiency Limited  United Kingdom                               51%

Gas Turbine Efficiency Sweden   Sweden                                       51%

AB

Gas Turbine Efficiency, Inc.    United States                                51%

Gas Turbine Efficiency, LLC     United States                                51%

Gas Turbine Fuel Systems        United Kingdom                              100%

Limited

Gentech Services Limited        Virgin Islands, British                      51%

Ghabet El Iraq for General      Iraq                                        100%

Contracting and Engineering

Services, Engineering

Consultancy (LLC)

Global Performance, LLC         United States                               100%

Greenwell Services (UK) Limited United Kingdom                              100%

Grenland Group (China) Limited  China                                       100%

GTS Power Solutions Limited     Jersey                                      100%

H & L Accessory, LLC            United States                                51%

Harwat International Finance    Curaçao                                     100%

Corporation N.V.

Harwood Production Services     United Kingdom                              100%

Limited

Heart of Mustang                United States                               100%

Hexagon Sociedad Anonima con    Equatorial Guinea                            65%

Consejo de Administracion

HFA Limited                     United Kingdom                              100%

Hoad, Inc.                      United States                               100%

ICGP, LLC; Infinity             United States                               100%

Construction Services, LP

Igranic Control Systems Limited United Kingdom                              100%

IMGP, LLC; Infinity Maintenance United States                               100%

Services, LP

Infinity Construction Holding,  United States                               100%

LLC

Infinity Maintenance Holding,   United States                               100%

LLC

Innofield Services Pty Ltd      Australia                                   100%

Integrated Maintenance Services United Kingdom                              100%

Limited

ISI Group, L.L.C.               United States                                90%

ISI Mustang (Argentina) S.A. Argentina                                    91%

ISI Mustang Bolivia S.R.L.      Bolivia                                      90%

ISI Mustang Chile SpA           Chile                                        90%

ISI Mustang Peru S.A.C.         Peru                                         89%

ISI Mustang Servicios de        Mexico                                       89%

Ingenieria de Mexico, S de R.L.

De C.V.

ISI Solutions Colombia Limitada Colombia                                     90%

ISI Solutions, Inc.             United States                                90%

J P Kenny Overseas Limited      Cyprus                                      100%

J P Kenny Technology Limited    United Kingdom                              100%

J W G Trustees Limited          United Kingdom                              100%

Jet Turbine Service LLC         United States                                51%

John Brown E & C Ltd            United Kingdom                              100%

John Wood Group B.V. Netherlands                                 100%

John Wood Group Holdings B.V. Netherlands                                 100%

John Wood Group US Company      United Kingdom                              100%

John Wood Group USA, Inc.       United States                               100%

JWG 16 Limited                  United Kingdom                              100%

JWG 64 Limited                  United Kingdom                              100%

JWG Cooperatief B.A Netherlands                                 100%

JWG Ireland CAD                 Ireland                                     100%

JWG Ireland NOK                 Ireland                                     100%

JWG Ireland USD                 Ireland                                     100%

JWG Ireland USD 2               Ireland                                     100%

JWG Ireland USD 3 Unlimited     Ireland                                     100%

Company

JWG Netherlands 1 B.V. Netherlands                                 100%

JWG Netherlands 2 B.V. Netherlands                                 100%

JWG Netherlands 3 B.V. Netherlands                                 100%

JWG Netherlands 4 B.V.          Netherlands                                 100%

JWG Nigeria Limited             Nigeria                                      49%

JWG Norway Investments Limited  United Kingdom                              100%

JWGUS Company Limited           United Kingdom                              100%

JWGUSA Holdings Limited         United Kingdom                              100%

JWGUSA Holdings, Inc.           United States                               100%

JWH Management Services Limited United Kingdom 100%

Kelchner, Inc.                  United States                               100%

Kelfield, Inc.                  United States                               100%

Kelwat Investments Limited      United Kingdom                              100%

KTR-WG Turbine Services LLP     Kazakhstan                                   26%

Leadgate Plant Hire Limited     United Kingdom                               95%

Liberty Services, Inc.          United States                                33%

Libyan-Australian Joint Venture Libya                                        50%

Company for Safety Services

M & O Global Pty Ltd Australia                                   100%

M&O Pacific Limited             New Zealand                                 100%

Marine & Offshore Group Pty Australia                                   100%

Limited

Marine Computation Services     Ireland                                     100%

Kenny Group Limited

Massy Wood Group Ltd.           Trinidad and Tobago                          50%

MCS Kenny International (UK)    United Kingdom                              100%

Limited

MCS Kenny International Norge   Norway                                      100%

AS

Melwat Finance Limited          United Kingdom                              100%

Mitchell's Oil Field Services,  United States                               100%

Inc.

Multiphase Solutions Kenny      United Kingdom                              100%

Limited

Mustang and Faisal Jameel       Saudi Arabia                                 56%

Al-Hejailan and Dar Al-Riyadh

Consulting Company

Mustang Engineering (North      United States                               100%

Carolina) PC

Mustang Engineering Florida,    United States                               100%

Inc.

Mustang Engineering India       India                                       100%

Private Limited

Mustang Engineering Limited     United Kingdom                              100%

Mustang Engineering Pty. Ltd.   Australia                                   100%

Mustang International, L.P.     United States                               100%

Mustang Malaysia Sdn. Bhd.      Malaysia                                    100%

Mustang of New Jersey, Inc.     United States                                80%

Mustang Process and Industrial  United States                               100%

Inc.

Mustang Saudi Arabia Co. Ltd.   Saudi Arabia                                100%

Mustang Subs GP, Inc.           United States                               100%

Mustang Subs LP, Inc.           United States                               100%

NDT Systems, Inc.               United States                               100%

Northern Integrated Services    United Kingdom                               50%

Limited

O.T.S. Finance and Management   Vanuatu                                     100%

Limited

ODL Canada Limited              Canada                                       50%

ODL PTY LTD Australia 100%

ODL, Inc.                       United States                               100%

Offshore Design Limited         United Kingdom                              100%

Onshore Pipeline Engineering,   United States                               100%

D.P.C.

OTS International Training      United Kingdom                              100%

Services Limited

Overseas Technical Service      United Kingdom                              100%

(Harrow) Limited

Overseas Technical Service      Vanuatu                                     100%

International Limited

Overseas Technical Services     Nigeria                                      83%

Nigeria Limited

Patrie Investments B.V.         Netherlands                                 100%

Prezioso Pyeroy Services        United Kingdom                               95%

Limited

Procesos y Disenos Energeticos  Colombia                                    100%

SA

Production Services Network     United Kingdom                              100%

(UK) Limited

Production Services Network     Angola                                       49%

Angola Limitada

Production Services Network     United Kingdom                              100%

Bangladesh Limited

Production Services Network     United Kingdom                              100%

Corporate Limited

Production Services Network     United Arab Emirates                         49%

Emirates LLC

Production Services Network     Russian Federation                           50%

Eurasia LLC

Production Services Network     Gabon                                       100%

Gabon Sole Limited

Production Services Network     Bermuda                                     100%

International Limited

Production Services Network     Qatar                                        24%

Qatar LLC

Production Services Network     Philippines                                  75%

Resource Corp

Production Services Network     Russian Federation                           50%

Sakhalin LLC

Proyectos Especializados de     Mexico                                       51%

Generacion EEG, S.A. de C.V.

PSJ Fabrications Ltd            United Kingdom                              100%

PSN (Angola) Limited            United Kingdom                              100%

PSN (Philippines) Limited       United Kingdom                              100%

PSN Asia Limited                United Kingdom                              100%

PSN KazStroy JSC Kazakhstan                                   50%

PSN Overseas Holding Company    United Arab Emirates                        100%

Limited

PSN Overseas Limited            United Kingdom                              100%

PSN Overseas Romania SRL        Romania                                     100%

PSN Production Services Network Philippines                                  60%

Philippines Corp

PT Australian Skills Training Indonesia                                    95%

PT. Wood Group Kenny Indonesia Indonesia                                    90%

Pyeroy (Ireland) Limited        Ireland                                      95%

Pyeroy Limited                  United Kingdom                               95%

RWG (Repair & Overhauls)        United Kingdom                               50%

Limited

RWG (Repair & Overhauls) USA,   United States                                50%

Inc.

RWG OTEC Sdn. Bhd.              Malaysia                                     25%

RWG Reparacao E Revisao         Brazil                                       50%

Limitada

Sakhalin Technical Services     Russian Federation                           40%

Network LLC

Santos Barbosa Tecnica Comercio Brazil                                      100%

e Servicios Ltda

SARL Wood Group Algeria         Algeria                                     100%

SD FortyFive Limited            United Kingdom                              100%

Servicios EHC Training C.A.     Venezuela                                    50%

SgurrControl Limited            United Kingdom                               39%

SgurrEnergy Inc.                United States                                60%

SgurrEnergy India Pvt. Ltd      India                                        38%

SgurrEnergy Limited             United Kingdom                               76%

Shanahan Engineering            Switzerland                                  51%

(Switzerland) GmbH

Shanahan Engineering Group      Ireland                                      49%

Shanahan Engineering Limited    Ireland                                      51%

Shanahan Engineering Turkey     Turkey                                       51%

Insaat Sanayive Ticaret Limited

Sirket

Shanahan Engineering, Inc.      United States                                51%

Ship Support Services Limited   United Kingdom                               48%

Sigma 3 (North Sea) Limited     United Kingdom                               63%

Simco                           Venezuela                                    90%

SKS Wood Sdn Bhd                Brunei                                       43%

Sulzer Wood Limited             United Kingdom                               49%

Swaggart Brothers, Inc.         United States                               100%

Swaggart Logging & Excavation   United States                               100%

LLC

The Automated Technology Group  United Kingdom                              100%

Limited

The Igranic Group Limited       United Kingdom                              100%

TransCanada Turbines (UK)       United Kingdom                               50%

Limited

TransCanada Turbines Australia  Australia                                    50%

Pty Limited

TransCanada Turbines Ltd.       Canada                                       50%

TransCanada Turbines, Inc.      United States                                50%

Turbocare S.p.A                 Poland                                       51%

United Electrical &             United States                               100%

Instrumentation (Nevada), Inc

United Electrical &             United States                               100%

Instrumentation Management, Ltd

United Electrical &             United States                               100%

Instrumentation, Ltd

Vista-Mustang JV Corp.          Canada                                       50%

W L S Holdings Limited          United Kingdom                              100%

WG International Services       Cyprus                                      100%

Limited

WG Intetech Holdings Limited    United Kingdom                               90%

WG Power US Limited             United Kingdom                              100%

WGD003 Limited                  United Kingdom                              100%

WGD004 Limited                  United Kingdom                              100%

WGD005 Limited                  United Kingdom                              100%

WGD006 Limited                  United Kingdom                              100%

WGD007 Limited                  United Kingdom                              100%

WGD008 Limited                  United Kingdom                              100%

WGD009 Limited                  United Kingdom                              100%

WGD010 Limited                  United Kingdom                              100%

WGD013 Limited                  United Kingdom                              100%

WGD014 Limited                  United Kingdom                              100%

WGD015 Limited                  United Kingdom                              100%

WGD016 Limited                  United Kingdom                              100%

WGD017 Limited                  United Kingdom                              100%

WGD018 Limited                  United Kingdom                              100%

WGD020 Limited                  United Kingdom                              100%

WGD021 Limited                  United Kingdom                              100%

WGD022 Limited                  United Kingdom                              100%

WGD023 Limited                  United Kingdom                              100%

WGD024 Limited                  United Kingdom                              100%

WGD025 Limited                  United Kingdom                              100%

WGD026 Limited                  United Kingdom                              100%

WGD027 Limited                  United Kingdom                              100%

WGD028 Limited                  United Kingdom                              100%

WGD029 Limited                  United Kingdom                              100%

WGD030 Limited                  United Kingdom                              100%

WGD031 Limited                  United Kingdom                              100%

WGD032 Limited                  United Kingdom                              100%

WGD034 Limited                  United Kingdom                              100%

WGD035 Limited                  United Kingdom                              100%

WGPF Contracting Limited        Cyprus                                      100%

WGPS International Limited      Cyprus                                      100%

WGPS Peru S.A.C.                Peru                                        100%

WGPSN (Holdings) Limited        United Kingdom                              100%

WGPSN Eurasia Limited           United Kingdom                               50%

WGPSN Queensland Pty Ltd        Australia                                   100%

Wood Group - CCC Limited        Cyprus                                      100%

Wood Group - Nobel Oil B.V. Netherlands                                 100%

Wood Group (Canada) Limited     Canada                                      100%

Wood Group (South Africa) Pty   South Africa 100%

Ltd

Wood Group Algeria Limited      United Kingdom                              100%

Wood Group Algiers Limited      United Kingdom                              100%

Wood Group Angola Limited       Cyprus                                      100%

Wood Group Annaba Limited       United Kingdom                              100%

Wood Group Arzew Limited        United Kingdom                              100%

Wood Group Asset Management     United Kingdom                              100%

Solutions Limited

Wood Group Australia PTY Ltd    Australia                                   100%

Wood Group de Chile S.A.        Chile                                        51%

Wood Group de Mexico S.A. de    Mexico                                      100%

C.V.

Wood Group E & PF Holdings,     United States                               100%

Inc.

Wood Group Engineering &        United Kingdom                              100%

Operations Support Limited

Wood Group Engineering          British Virgin Islands                      100%

(Colombia) Ltd.

Wood Group Engineering (North   United Kingdom                              100%

Sea) Limited

Wood Group Engineering and      Australia                                   100%

Production Facilities Australia

Pty Ltd

Wood Group Engineering and      Brazil                                      100%

Production Facilities Brasil

Ltda

Wood Group Engineering and      Mexico                                      100%

Production Facilities de Mexico

S.A. de C.V.

Wood Group Engineering          United Kingdom                              100%

Contractors Limited

Wood Group Engineering          United Kingdom                              100%

International Limited

Wood Group Engineering Pte.     Singapore                                   100%

Limited

Wood Group Engineering Sdn. Bhd Malaysia                                    100%

Wood Group Engineering Services France                                      100%

(France) SAS

Wood Group Engineering Services Jersey                                      100%

(Middle East) Limited

Wood Group Engineering Services Cyprus                                      100%

(North Africa) Limited

Wood Group Engineering Services Qatar                                        25%

(Qatar) LLC

Wood Group Environmental        United Kingdom                              100%

Services Limited

Wood Group Equatorial Guinea    Cyprus                                      100%

Limited

Wood Group ESP Saudi Arabia     Saudi Arabia 51%

Limited

Wood Group Frontier Limited     United Kingdom                              100%

Wood Group Gas Turbine Services Oman                                         36%

& Partner LLC

Wood Group Gas Turbine Services United Kingdom                              100%

Holdings Limited

Wood Group Gas Turbines         British Virgin Islands                       51%

(Venezuela) Limited

Wood Group Gas Turbines De      Venezuela                                    99%

Venezuela, S.A.

Wood Group Gas Turbines Limited United Kingdom                              100%

Wood Group Ghana Limited        Ghana                                        49%

Wood Group Hassi Messaoud       United Kingdom                              100%

Limited

Wood Group Holdings             United Kingdom                              100%

(International) Limited

Wood Group HR Limited           United Kingdom                              100%

Wood Group Industrial Services  United Kingdom                               95%

Limited

Wood Group Integrity Management Australia                                   100%

Pty Ltd

Wood Group Integrity Management United Kingdom                              100%

UK Limited

Wood Group International        United Kingdom                              100%

Limited

Wood Group International N.V.   Curaçao                                     100%

Wood Group International        Singapore                                   100%

Services Pte. Ltd.

Wood Group Intetech Consultancy United Kingdom                               90%

Limited

Wood Group Intetech Limited     United Kingdom                               90%

Wood Group Intetech Overseas    United Kingdom                               90%

Holdings Company Limited

Wood Group Intetech Wells       United Kingdom                               90%

Limited

Wood Group Investments Limited  United Kingdom                              100%

Wood Group Kazakhstan LLP Kazakhstan                                  100%

Wood Group Kenny Australia Pty  Australia                                   100%

Ltd

Wood Group Kenny Canada Ltd.    Canada                                      100%

Wood Group Kenny Corporate      United Kingdom                              100%

Limited

Wood Group Kenny do Brasil      Brazil                                      100%

Servicos de Engenharia Ltda

Wood Group Kenny India Private  India                                       100%

Limited

Wood Group Kenny Ireland        Ireland                                     100%

Limited

Wood Group Kenny Limited        United Kingdom                              100%

Wood Group Kenny Norge AS       Norway                                      100%

Wood Group Kenny SAS            France                                      100%

Wood Group Kenny Sdn Bhd        Malaysia                                    100%

Wood Group Kenny UK Limited     United Kingdom                              100%

Wood Group Kenny, Inc.          United States                               100%

Wood Group Kianda Limitada      Angola                                       41%

Wood Group Limited              United Kingdom                              100%

Wood Group Management Services  Mexico                                      100%

de Mexico S.A. de C.V.

Wood Group Management Services  United Kingdom                              100%

Limited

Wood Group Management Services, United States                               100%

Inc.

Wood Group Mocambique, Limitada Mozambique                                  100%

Wood Group Mustang (Canada)     Canada                                      100%

Construction Management Inc.

Wood Group Mustang (Canada)     Canada                                      100%

Inc.

Wood Group Mustang (M) Sdn.     Malaysia                                    100%

Bhd.

Wood Group Mustang Holdings,    United States                               100%

Inc.

Wood Group Mustang Norway AS    Norway                                      100%

Wood Group Mustang Norway       Norway                                      100%

Operations AS

Wood Group Mustang, Inc.        United States                               100%

Wood Group Norway Holdings AS   Norway                                      100%

Wood Group O&M International,   Cayman Islands                              100%

Ltd.

Wood Group Offshore Services    Guernsey                                    100%

Limited

Wood Group Oilfield Rentals     United Kingdom                              100%

Limited

Wood Group Operations Holdings  United Kingdom                              100%

Limited

Wood Group OTS International    Cayman Islands                              100%

Inc.

Wood Group Overseas N.V.        Curaçao                                     100%

Wood Group PDE Limited          British Virgin Islands                      100%

Wood Group Peru S.A.C.          Peru                                        100%

Wood Group Power Investments    United Kingdom                              100%

Limited

Wood Group Pratt & Whitney      United States                                25%

Industrial Turbine Services,

LLC

Wood Group Production And       United States                               100%

Consulting Services, Inc

Wood Group Production           Malaysia                                     48%

Facilities (Malaysia) Sdn. Bhd.

Wood Group Production           Jersey                                      100%

Facilities Limited

Wood Group Production           Australia                                   100%

Facilities Pty Limited

Wood Group Production Services  United States                               100%

Global, Inc.

Wood Group Production Services  United Kingdom                              100%

UK Limited

Wood Group Production           United Kingdom                              100%

Technology Limited

Wood Group Properties Limited   United Kingdom                              100%

Wood Group PSN Australia Pty    Australia                                   100%

Ltd

Wood Group PSN Canada Inc.      Canada                                      100%

Wood Group PSN Commissioning    United States                               100%

Services, Inc

Wood Group PSN India Private    India                                       100%

Limited

Wood Group PSN Lease            United States                               100%

Maintenance & Construction LLC

Wood Group PSN Limited          United Kingdom                              100%

Wood Group PSN Uganda Limited   Uganda                                      100%

Wood Group PSN, Inc.            United States                               100%

Wood Group Somias SPA           Algeria                                      55%

Wood Group Support Services,    United States                               100%

Inc.

Wood Group Trinidad & Tobago    Trinidad and Tobago                         100%

Limited

Wood Group US Holdings, Inc.    United States                               100%

Wood Group US International,    United States                               100%

Inc.

Wood Group USA, Inc.            United States                               100%

Wood Group Well Support, Inc.   United States                               100%

Wood Group, LLC                 Iraq                                        100%

Wood Group/MO Services, Inc.    United States                               100%

Wood Group/OTS Limited          United Kingdom                              100%

Woodhill Frontier Limited       United Kingdom                              100%

Yeskertkish Kyzmet Kazakhstan   Kazakhstan                                  100%

LLP

Details of the direct subsidiaries of John Wood Group PLC are provided in note 1 to the parent company financial statements.

Shareholder information

Payment of dividends

The Company declares its dividends in US dollars.  As a result of the shareholders being mainly UK based, dividends will be paid in sterling, but if you would like to receive your dividend in US dollars please contact the Registrars at the address below. All shareholders will receive dividends in sterling unless requested.  If you are a UK based shareholder, the Company encourages you to have your dividends paid through the BACS (Banker’s Automated Clearing Services) system.  The benefit of the BACS payment method is that the Registrars post the tax vouchers directly to the shareholders, whilst the dividend is credited on the payment date to the shareholder’s Bank or Building Society account.  UK shareholders who have not yet arranged for their dividends to be paid direct to their Bank or Building Society account and wish to benefit from this service should contact the Registrars at the address below. Sterling dividends will be translated at the closing mid-point spot rate on 8 April 2016 as published in the Financial Times on 9 April 2016.

Officers and advisers

Secretary and Registered Office Registrars

W G Setter                      Equiniti Limited

John Wood Group PLC             Aspect House

15 Justice Mill Lane            Spencer Road

Aberdeen                        Lancing

AB11 6EQ                        West Sussex

BN99 6DA

Tel: 01224 851000               Tel: 0871 384 2649

Stockbrokers              Independent Auditors

JPMorgan Cazenove Limited PricewaterhouseCoopers LLP

Credit Suisse             Chartered Accountants and Statutory Auditors

32 Albyn Place

Aberdeen

AB10 IYL

Company Solicitors

Slaughter and May

Financial calendar

Results announced      23 February 2016

Ex-dividend date       7 April 2016

Dividend record date   8 April 2016

Annual General Meeting 11 May 2016

Dividend payment date  17 May 2016