Full year results for the year ended 31 December 2020

Resilient performance from strategic broadening across Energy and Built Environment markets

Actions to reduce cost, protect the balance sheet & generate strong cashflow enabled margin protection and net debt reduction. Financial focus in 2021 on margins and cash generation

Wood, the global consulting and engineering company, today announces its results for the year ended 31 December 2020:

“Our resilient financial performance in 2020 was underpinned by our strategic positioning across broad end markets and flexible business model. We saw growth in renewables activity, strength in the built environment and relatively robust revenue in process & chemicals and we continued to win work, against the challenging backdrop of Covid-19 and oil price volatility.  Our decisive actions, focused on the health & safety of our people, delivering for our clients, reducing cost, protecting the balance sheet and generating strong cashflow, underpinned delivery of strong margins and a significant reduction in net debt. Looking ahead, we are pleased to be nearing resolution of the legacy investigations so that we will be able to draw a line under them and while near-term headwinds remain in 2021, we saw improving momentum in awards in late Q4 and are encouraged by the medium-term outlook for our markets. To ensure our business is fit for the accelerating pace of energy transition and the drive towards more sustainable infrastructure, we are today announcing programmes to unlock stronger medium-term growth, deliver efficiency and create value.”- Robin Watson, Chief Executive

Highlights

Strategic broadening benefitting revenue resilience

• Resilient performance in unprecedented trading conditions underpinned by breadth of exposure across Energy and Built Environment markets
• Revenue of $7.6bn down 23.5% (Revenue on a like for like basis of $7.5bn, down 20.2%)
• Significant reduction in conventional energy activity mitigated by strength in built environment, growth in renewables and relatively robust revenues in process & chemicals

Successfully protected margin through early action on cost  

• Strong EBITDA margin delivery; adjusted EBITDA margin 8.3% (2019: 8.6%) reflecting strong operational delivery in ASEAAA and TCS offset by substantially lower margins in ASA
• Leveraged flexible model to take early and decisive action to protect margin; improved operational utilisation and delivered c$230m overhead savings with an exceptional cost to achieve of c$100m
• Adjusted EBITDA of $630m and operating profit before exceptionals of $214m in line with January trading update

Delivering a significant reduction in net debt

• Net debt excluding leases reduced by $410m to $1.01bn at 31 December 2020 (31 December 2019: $1.42bn and 30 June 2020: $1.22bn), benefitting from disposal proceeds from portfolio optimisation, steps taken to protect cashflow and improved working capital performance
• Net debt excluding leases : adjusted EBITDA (excluding IFRS 16) of 2.1x⁴ (31 December 2019: 2.0x and 30 June 2020: 2.0x). Covenants at 3.5x
• Considerable financial headroom: undrawn facilities of $1.74bn and revolving credit facility extended to May 2023
• Prioritising balance sheet strength; no dividends proposed in respect of FY 2020

Differentiated ESG and sustainability approach to maintain sector leading position

• Committed to maintaining our position as leaders in our field on ESG matters
• New targets announced for the delivery of our purpose, sustainability, inclusion & diversity, fair working practices and community and environmental impact
• Committed to reduce scope 1 and 2 emissions by 40% by 2030, on our journey to net zero
• Strong third-party recognition: awarded AA “Leader” rating from MSCI for sixth consecutive year
• Delivering innovative solutions for energy transition and sustainable infrastructure: recently awarded evaluation scopes for the decarbonisation of industrial clusters and the supply of domestic hydrogen
• Leadership incentivisation aligned to delivery of future ESG & sustainability targets

Accelerating our medium-term strategy: the Future Fit programme

• 18 month programme of initiatives to unlock stronger medium-term growth, deliver efficiency and create value
• Optimising our operating model - simplifying to three global business units; Consulting, Projects and Operations
• Efficiency savings of c$40m in 2021, with costs to deliver of c$30m
• Organising our business to deliver solutions for a net zero future and a more sustainable, resilient and livable world
• New Chief Operating Officer role, established to drive consistent global predictable execution outcomes, commercial innovation and digital delivery

Approaching resolution on legacy investigations

• Discussions concerning the resolution of investigations by the SFO and authorities in the US, Brazil & Scotland are at an advanced stage
• Anticipation that all matters will be settled at an aggregate cost of $197m, including $46m provided in 2019. Additional provision of $151m booked in 2020. Cash settlement expected over the period of 2021-2024

Outlook

Order book reflects macro conditions & tendering approach with improving award momentum in late Q4

• Order book at 31 December $6.5bn; 67% to be delivered in 2021, typical at this point in the year
• Order book down c17% on 2019 reflecting macro conditions and discerning bidder approach
• Progression in order book reflects expectations of strength in built environment, robustness in renewables and lower project awards in conventional energy and process & chemicals
• Improving momentum in new awards in late Q4 2020; December order book up c5% on November
• Short cycle order book combined with opportunity pipeline at pre-Covid 19 levels, supporting expectation of swift acceleration in awards as markets recover

Order book evolution; evolving towards lower risk, higher margin consultancy

• Strategic positioning, differentiation and strong customer relationships key to winning work
• Increasing proportion of order book from consultancy work, particularly in built environment

2021 financial focus: EBITDA margin improvement & cashflow

• Expectation of lower activity and a continued focus on improving margin
• Margin improvement will be driven by maintaining high utilisation, improved project execution and operational and efficiency improvements, including $40m from Future Fit, to offset lower activity. Reversal of temporary savings will be offset by the FY impact of 2020 savings. Business mix more orientated towards consultancy will also benefit margin
• Cash generation to benefit from unwind of customer advances not repeating, partly offset by some investigation settlements and increased capex related to investment in digitalisation

Notes:

1. Revenue on a like-for-like basis is calculated as revenue less revenue from disposals executed in 2020 and adjusted EBITDA on a like-for-like basis is calculated as adjusted EBITDA less the adjusted EBITDA from those disposals. In 2020 executed disposals consisted of our nuclear and industrial services businesses, YKK and our interest in TransCanada Turbines. Comparative figures also exclude revenue and adjusted EBITDA from the disposal of TNT, completed in 2019. These amounts are presented as a measure of underlying business performance excluding businesses disposed. These disposals accounted for $76m of revenue in 2020 (2019: $504m) and Adjusted EBITDA of $14m (2019: $60m).

2. A reconciliation of adjusted EBITDA to operating profit (pre-exceptional items) is shown in note 1 to the financial statements.

3. A reconciliation of adjusted diluted earnings per share to basic earnings per share is shown in note 8 to the financial statements.

4. Net debt excluding leases is total group borrowings, offset by cash and cash equivalents. Borrowings comprise loans drawn on the Group’s revolving credit facility, term loans, overdrafts and unsecured senior loan notes issued in the US private placement market. Borrowings do not include obligations relating to leases. Cash and cash equivalents include cash at bank and in hand and short term bank deposits. Borrowings, cash and cash equivalents contained within assets classified as held for sale are also included in net debt. The net debt: adjusted EBITDA ratio is calculated on the existing basis prior to the adoption of IFRS 16 in 2019 and is based on net debt excluding leases. These measures are presented as they closely aligned to the measure used in our financing covenants. A reconciliation of net debt excluding leases to net debt including leases is show in note 29 to the financial statements.
5. Order book comprises revenue that is supported by a signed contract or written purchase order for work secured under a single contract award or frame agreements. Work under multi-year agreements is recognised in order book according to anticipated activity supported by purchase orders, customer plans or management estimates.  Where contracts have optional extension periods, only the confirmed term is included. Order book disclosure is aligned with the IFRS definition of revenue and does not include Wood’s proportional share of joint venture order book. Order book is presented as an indicator of the visibility of future revenue.

Wood is a global leader in consulting, projects and operations solutions in energy and the built environment. www.woodplc.com

• Download the Full year results for the year ended 31 December 2020 report here

Wood

Andrew Rose – President, Investor Relations                                01224 532 716

Ellie Dixon – Vice President, Investor Relations                             01224 851 369

Citigate Dewe Rogerson

Kevin Smith 020 7638 9571
Chris Barrie

There will be an analyst and investor presentation webcast today at 9:00am, immediately followed by a live Q&A conference call. Replay facilities will be available later in the day. The webcast can be accessed using the following link: https://edge.media-server.com/mmc/p/5s68dpt8

If you wish to ask a question during the Q&A session, or are unable to listen to the presentation via the webcast, please dial in to the audio conference call using the details below. Please note that questions may be submitted via the conference call only and it is recommended that you dial in at the start of the webcast.

UK / international: +44 2071 928 338

US: +1 646 741 3167

Conference passcode: 5046826

Notification authorised by:

Martin J McIntyre

Group General Counsel and Company Secretary