This announcement contains inside information
Improving business momentum and sale of Built Environment progressing well
Year ended 31 December
Revenue (pre-exceptional items)1
Growth on a like-for-like basis2
Growth on a like-for-like basis2
Adjusted EBITDA margin
Operating profit before exceptional items
Operating profit / (loss)
Loss for the year
Basic EPS (c)
Adjusted diluted EPS4 (c)
Net cash (used in)/generated from operating activities
Free cash flow (new definition)5
Net debt including leases
Net debt excluding leases6
Net debt / adjusted EBITDA (reported basis)7
See notes on page 4
Robin Watson, Chief Executive, said:
“2021 was a challenging year for the Group, with the ongoing pressures of the pandemic, mixed market conditions across our businesses and continued challenges in Projects impacting our performance. Despite this, we ended the year with positive momentum and a growing order book (up 19% on last year) which gives us confidence that activity levels will be higher in 2022.
“The sale process of our Built Environment business is progressing well and we continue to expect to announce a sale agreement in the second quarter of this year. A sale will deliver significant value for our shareholders and help move the Group onto its next chapter.
“We are now focused on the future for Wood beyond this sale – to ensure we can fully capitalise on our deep engineering knowledge and expertise to capture the growth opportunities ahead across both energy security and sustainability, as we help clients move towards net zero.
“I have shared with the Board that I consider the sale of our Built Environment business as marking the start of the next strategic phase for Wood and an appropriate time for me to step down as Chief Executive. I look forward to continuing to serve on the Board until my successor is in place and I remain fully committed to our business delivery and enabling a smooth transition.”
- Revenue down 14% on a like-for-like basis2, with growth in Consulting and Operations more than offset by a significant decline in Projects
- Stronger sequential H2 performance: H2 revenue was 4% higher than H1 with Projects stabilising and growth across Consulting (up 4%) and Operations (up 10%)
- Adjusted EBITDA down 10% on a like-for-like basis2, with improved EBITDA in Consulting offset by lower EBITDA in Projects and Operations (see also note 9 on page 4)
- Margin improvement (like-for-like) of 0.4ppts2 including cost efficiencies, revenue mix and improved overall execution
- Exceptional items of $160 million (2020: $247 million) includes the previously announced $99 million write down of our Aegis Poland contract (see page 6 for details) and $78 million of restructuring costs
- Adjusted diluted EPS of 17.5c reflects the lower adjusted EBITDA
- Free cash flow (new definition)5of $(398) million includes a working capital outflow of $306 million and exceptional cash costs of $159 million. Our definition of free cash flow includes all cash flows before dividends and M&A
- Working capital outflow includesa $265 million outflow in our Projects business as significantly lower activity levels in the year led to a significant working capital unwind
- Net debt of $1.4 billion at 31 December 2021 reflects the negative free cash flow in the year
- Net debt / adjusted EBITDA (reported basis) at 3.3 times at 31 December 2021, within our covenant level for the Group’s borrowings, which are set at 3.5x and measured twice per year
- Order book up 19% year-on-year to $7.7 billion
- Strong growth in both Consulting (up 24%) and Operations (up 27%)
- Lower growth (up 2%) in Projects, partly reflecting our move away from higher risk lump sum contracts and with an improving trend as the year progressed
- Strong recovery in the order book in the conventional energy market (up 45%) across both Consulting and Operations including several multi-year renewals
- At December 2021, revenue in our order book for 2022 was $4,655 million (December 2020: $4,399 million)
- Continue to reduce costs and reduce project risk exposure
- Around $40 million of cost savings realised from our Future Fit Programme in the year
- Continue to reduce our risk exposure across Projects business (see page 8 for details)
- Progress on our ESG strategy
- Multiple contract wins across energy transition and decarbonisation throughout the year as we continue to help our customers deliver on their own ESG commitments
- 31% reduction in scope 1 and 2 emissions (target 40% reduction by 2030 on a 2019 baseline)
- Maintained our AA “Leader” rating from MSCI
- Increased female representation in senior leadership roles, targeting 40% by 2030
Delay to results and Aegis Poland review
- On 21 February 2022, we announced that a delay to the publication of our results was necessary to finalise our reported results and to conclude the year-end audit process with our auditor, KPMG LLP. The delay was required to allow an external investigation and review to be undertaken, principally in relation to the historical carrying value of the Aegis Poland project contract and the process by which this was determined
- The investigation and review have been concluded and there is no change to the historical carrying value of the Aegis Poland contract or to the previously communicated year-end exceptional charge of $99 million announced in our release of 21 February 2022
Outlook for 2022
- We expect higher revenue across our business supported by the growth in our order book, with revenue in our order book for 2022 of $4,655 million (up 6% on comparable figure last year)
- The proposed sale of the Built Environment business will have a significant impact on our reported results and, as such, we are not providing detailed financial guidance at this stage
- Cash performance will be impacted by ongoing exceptional cash drags (including SFO payments, restructuring costs, onerous leases and outflows on our Aegis Poland contract). As such we expect any improvement in our net debt to come from the proceeds from the sale of Built Environment
- As usual in our business, we expect a working capital outflow in the first half of the year. As such our net debt is expected to be higher at June 2022 than at December 2021
Update on Built Environment sale
- Sale process progressing well, sale agreement expected to be announced in late Q2
- Sale is expected to deliver significant value for our shareholders, strengthen our balance sheet and provide the financial flexibility to deliver our strategy
Update on activities in Russia
- In March 2022, we took the decision to exit Russia and have begun the process of withdrawing from operations in the country
- Operations in Russia accounted for around 1% of Group revenue in 2021
- We announced today that Robin Watson, Chief Executive, has advised the Board of his intention to retire as Chief Executive
- The Company has initiated the process to appoint his successor and Robin will remain in his role until his successor is in place
Capital Markets Day
- We plan to hold a Capital Markets Day at a later date and following the sale of the Built Environment business. This will include how Wood can best take advantage of the growth opportunities across energy security and sustainability
- This Capital Markets Day will include an updated view on the medium-term growth and margin prospects for the Group
A meeting for investors and analysts will be held at Pan Pacific London, EC3A 7AB at 9:00am (UK time). The presentation will be webcast live at https://edge.media-server.com/mmc/p/etzdfsix.
It will subsequently be made available to watch on demand at www.woodplc.com/investors. A transcript will also be made available on our website. The event will also be available as an audio-only conference call (UK: 0800 279 6619; Int’l: +44 (0)207 192 8338; USA: 877 870 9135), conference passcode 4787332.
For further information:
Simon McGough, President, Investor Relations +44 (0)7850 978 741
Ellie Dixon, Vice President, Investor Relations +44 (0)1224 851 369
Kevin Smith, Citigate Dewe Rogerson +44 (0)20 7638 9571
Adjustments between statutory and underlying information
The Group uses various alternative performance measures (APMs) to enable users to better understand the performance and earnings trends of the Group. The Directors believe the APMs provide a consistent measure of business performance year-to-year and they are used by management to measure operating performance and for forecasting and decision-making. The Group believes they are used by investors in analysing business performance. These APMs are not defined by IFRS and there is a level of judgement involved in identifying the adjustments required to calculate them. As the APMs used are not defined under IFRS, they may not be comparable to similar measures used by other companies. They are not a substitute for measures defined under IFRS.
Note 1: Revenue for FY21 includes an exceptional item of $(25.4) million related to Aegis Poland. Revenue (pre-exceptional items) is an APM that is used throughout this Report as the Group believes it provides a more useful measure of performance year-to-year.
Note 2: Revenue on a like-for-like basis is calculated as revenue less revenue from disposals executed in 2021, and adjusted EBITDA on a like-for-like basis is calculated as adjusted EBITDA less the adjusted EBITDA from those disposals. These amounts are presented as a measure of underlying business performance excluding businesses disposed. In FY21 executed disposals consisted of our joint venture interest in Sulzer Wood. Comparative figures also exclude revenue and adjusted EBITDA from the disposals of our nuclear and industrial services businesses, YKK and our joint venture interest in TransCanada Turbines (TCT) completed in 2020. These disposals accounted for $nil revenue in FY21 (FY20: $76 million) and adjusted EBITDA of $nil in FY21 (FY20: $16 million). Like-for-like revenue growth refers to revenue (pre-exceptional items).
Note 3: A reconciliation of adjusted EBITDA to operating profit (pre-exceptional items) is shown in note 1 to the financial statements.
Note 4: A reconciliation of adjusted diluted earnings per share to basic earnings per share is shown in note 8 to the financial statements.
Note 5: Free cash flow is defined as all cash flows before acquisitions, disposals and dividends. It includes all mandatory payments the Group makes such as interest and tax, and all exceptional cash flows. It excludes the impacts of leases. A reconciliation of free cash flow to our statutory cash flow statement is shown on page 22.
Note 6: 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 (RCF), the UKEF, overdrafts and unsecured senior loan notes issued in the US private placement market (USPP). Cash and cash equivalents include cash at bank and in hand and short-term bank deposits. A reconciliation of net debt excluding leases to net debt including leases is show in note 29 to the financial statements.
Note 7: The majority of the Group’s borrowings have financial covenants (RCF, USPP, UKEF – as shown in note 6). The two covenant measures are: (i) net debt to adjusted EBITDA not exceeding 3.5 times, (ii) adjusted EBITA not less than 3.5 times interest. These covenants are measured on 30 June and 31 December each year. The net debt / 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. See calculations on pages 28 and 29.
Note 8: 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.
Note 9: Adjusted EBITDA in 2021 benefited from a change in the classification of Aegis Poland contract losses. Previously these were included within adjusted EBITDA ($11 million in FY20, $9 million in HY21) and now have been classified (from H2 2021 onwards, including adjusting HY21) as exceptional items.
The person responsible for arranging the release of this announcement on behalf of Wood is Martin McIntyre, Group General Counsel and Company Secretary.