This announcement contains inside information
Operational momentum and order book growth
Adjusted EBITDA margin
Operating profit before exceptional items
Results from continuing and discontinued operations1:
Profit / (loss) for the period
Basic EPS (c)
Adjusted diluted EPS5 (c)
Net cash used in operating activities
Free cash flow6
Net debt including leases
Net debt excluding leases7
Net debt / adjusted EBITDA (excluding leases)8
Built Environment Consulting is now treated as held for sale and its results shown as discontinued operations. We have adjusted our underlying results to reflect this, including restating comparatives. See notes on page 4.
Ken Gilmartin, CEO, said:
“Since becoming CEO in July, I have been really encouraged to see the improving operational momentum across our business, including some great client wins. The strong order book gives me confidence for the future but there is a lot more to do on cash generation and this is our top priority.
“We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow. We perform complex work in critical industries and our outstanding technical expertise and strong long-term client relationships position us well for growth across targeted markets. We have the consulting and engineering capabilities to help the world solve the global challenges of energy security, decarbonisation and energy transition. I look forward to sharing our plans at our capital markets day in November.
“In the meantime, we are focused on our culture and energising our people, performance excellence and strengthening our balance sheet through the completion of the sale of the Built Environment business, which we expect around the end of Q3”.
HY22 financial highlights
- Revenue (continuing operations) flat with growth in Operations (+18%) and Consulting (+2%) offset by the expected decline in Projects (-15%)
- Adjusted EBITDA (continuing operations) down 5%, with a robust performance in Consulting offset by a decline in Projects and Operations. Improved performance in Investment Services
- Margin (continuing operations) down 0.4ppts including the impact of the anticipated lower margin in Operations and a slightly lower margin in Consulting, both offsetting higher margins in Projects
- Exceptional items (continuing operations) pre interest and tax of $11 million (HY21: $15 million) including restructuring costs and an asbestos credit
- Adjusted diluted EPS of 5.7c down 36% reflects the lower EBITDA and higher finance expenses
- Free cash flow (including discontinued operations)of $(363) million includes a working capital outflow of $208 million and exceptional cash costs of $102 million, including the scheduled SFO settlement payment and costs associated with previously provided for loss-making contracts, principally Aegis
Sale of Built Environment Consulting to WSP Global expected to complete around the end of Q3
- Enterprise value of $1.81 billion, representing an EV multiple of 16x (incl. expected standalone costs)
- Net cash proceeds expected to be around $1.62 billion after working capital adjustments, tax and transaction costs
- Will transform balance sheet: the immediate use of proceeds will be to reduce the Group’s net debt
- Net debt (excluding leases) of $1,756 million at 30 June 2022 reflects the negative free cash flow in the period
- Net debt / adjusted EBITDA (excluding leases) at 4.2 times at 30 June 2022, below our covenant levels currently set at 4.5x for the June 2022 and December 2022 measurement dates (which revert back to 3.5x thereafter)
- Provisions: the trial for the legacy lawsuit with Enterprise, related to a chemical plant in Texas, started in April 2022 and has concluded, with a decision expected by year end
- Order book (continuing operations) up 5% to $6.4 billion with strong growth in Consulting (+16%) and Projects (+24%) partially offset by a decline in Operations (-6%), where the prior year benefited from significant multi-year orders
- Continue to de-risk our contract portfolio with 80% of Group revenue (continuing operations) now from reimbursable work (HY21: 75%) and only c.3% from lump sum turnkey contracts (FY21: c.6%)
- Multiple key contracts awarded in the period across all three business units, including a 10-year strategic partnership with Chevron
- Contracts wins across energy transition and decarbonisation worth over $500 million so far in 2022
Outlook for 2022
- As stated previously, we expect higher revenue across our business this year and an improved performance in the second half, helped by an improvement in our Turbines joint ventures
- At 30 June 2022, revenue in our order book (continuing operations) for the second half of 2022 was
$2.5 billion, an increase of 9% compared to the prior year equivalent figure of $2.3 billion.
- Our guidance for FY22, excluding Built Environment Consulting, is:
- Revenue between $5.2 billion and $5.5 billion
- Adjusted EBITDA between $370 million and $400 million
Updating our strategy
- We are updating our strategy, based on the strong foundations of Wood. We have unique consulting and engineering skills that are critical to solving the global challenges of energy security, decarbonisation and energy transition
- We will hold a Capital Markets Day on 29th November 2022 to outline our updated strategy in detail
- In the meantime, our near-term priorities are:
- Completing the sale of Built Environment Consulting
- Strengthening our balance sheet and restoring financial flexibility
- Focusing on our culture and energising our people
- Defining our priority growth markets
- Improving operational delivery and consistency
- Addressing our remaining legacy issues
A meeting for investors and analysts will be held at The London Stock Exchange (10 Paternoster Square, London, EC4M 7LS) at 9:00am. The presentation will be webcast live at https://edge.media-server.com/mmc/p/2y765v44.
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.
For further information:
Simon McGough, President, Investor Relations +44 (0)7850 978 741
Kevin Smith, Citigate Dewe Rogerson +44 (0)20 7638 9571
Notification authorised by Martin J McIntyre, Group General Counsel and Company Secretary.
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: The Built Environment Consulting business is now treated as held for sale and its results shown as discontinued operations. We have adjusted our underlying results to reflect this, including restatement of comparative information. The result of this is there is no contribution from Built Environment Consulting included in revenue or adjusted EBITDA in all periods. There is no change to EPS.
Note 2: 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 3: Revenue includes an exceptional item in HY22 of $(8.0) million (FY21 $(25.4) million) related to contract losses in respect of the closure of the Power and Industrials EPC business. In FY21 the exceptional item 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. Given the immaterial size of the exceptional item, we refer to revenue throughout the Report as the $2,561 million pre-exceptional figure.
Note 4: A reconciliation of adjusted EBITDA to operating profit (pre-exceptional items) is shown in note 2 to the financial statements.
Note 5: A reconciliation of adjusted diluted earnings per share to basic earnings per share is shown in note 7 to the financial statements.
Note 6: 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 IFRS 16 (Leases) accounting. A reconciliation of free cash flow to our statutory cash flow statement is shown on page 19.
Note 7: 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 15 to the financial statements.
Note 8: The majority of the Group’s borrowings have financial covenants (RCF, USPP, UKEF – as shown in note 6). The two covenant measures are currently: (i) net debt to adjusted EBITDA not exceeding 4.5 times (reverting to 3.5 times from June 2023 onwards), (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. The EBITDA for this calculation includes the contribution from Built Environment Consulting. These measures are presented as they closely aligned to the measure used in our financing covenants. See calculations on pages 24 and 25.