The first quarter has demonstrated the significant benefits of the operational platform we have created. Our integration programme is ahead of schedule and we are seeing good momentum in trading, cost and revenue synergy delivery. Our overall outlook is unchanged and we are confident of returning to growth in 2018.
We have seen good trading momentum across our business in the first quarter. Performance has been led by Asset Solutions Americas including capital projects activity in power, downstream & chemicals and US shale.
For 2018, our overall outlook is unchanged. We expect to deliver revenue and earnings growth and an in-year benefit from cost synergy delivery of >$50m. We are confident of delivering EBITA in line with guidance and market expectations1 and do not anticipate that 2018 EBITA will include any significant one off items2.
In addition to our typical second half bias, the phasing of cost synergies, projects and market recovery is expected to result in a c60% weighting of earnings to the second half of the year.
Asset Solutions Americas
- c35% of Revenue
- Markets: c70% Oil & gas, c30% Industrial/other energy
Capital projects accounts for c85% of segment revenue. We have seen increased EPC activity on projects in power and in downstream & chemicals, and these are the largest contributors to capital projects revenue. Improvement in US shale has continued, with activity focused on the Niobrara and Permian basins. In offshore upstream we remain active on a number of greenfield projects.
Our operations services work accounts for c15% of segment revenue. Challenging conditions in the Gulf of Mexico and the completion of commissioning work in 2017 are resulting in lower activity. In US shale, we are seeing an improvement in maintenance activity as expected. We have made good progress on revenue synergies, securing the engineering, procurement & construction, commissioning and operations scope for upstream assets in Trinidad.
Asset Solutions Europe, Africa, Asia and Australia
- c35% of Revenue
- Markets : c85% Oil & gas, c15% Other Industrial
Capital Projects accounts for c40% of segment revenue. Activity remains robust on projects including PMC work in Kuwait, our engineering and project management scope on the Marjan field for Saudi Aramco and our rejuvenation project for Brunei Shell Petroleum. We are encouraged by recent wins including the Saudi Aramco/SABIC integrated crude oils to chemicals complex.
Operations services activity accounts for c45% of segment revenue. We are seeing the strongest growth in Asia Pacific, where the Exxon contract in Papua New Guinea is performing well. Activity in the Middle East is robust, including increased work with Basra Gas Co. North Sea activity is showing moderate growth on 2017 from a low base and is expected to strengthen in the second half.
Turbine joint ventures accounts for c15% of revenue. Relative strength in RWG is being offset by weaker performance in EthosEnergy.
Specialist Technical Solutions
- c15% of Revenue
- Markets : c40% Oil & Gas, c30% Minerals processing, c15% Nuclear, c15% Industrial/other energy
We expect higher activity in Minerals processing, particularly in South America and in Australia where we have good visibility on work including the Gruyere gold EPC project. Activity in automation, nuclear and subsea remains robust.
Environment and Infrastructure Solutions
- c12% of Revenue
- Markets: c95% Industrial/government, c5% Oil & Gas
E&IS provides leading environmental remediation consultancy and engineering & construction project management services predominantly in North America. Performance will benefit from increased activity as a result of US government and industrial spending and the absence of cost overruns on projects experienced in 2017.
Synergies
Our integration programme is ahead of schedule. We expect an in-year benefit from cost synergy delivery of >$50m and an exit run rate of >$80m by the end of the first year post completion. The majority of cost synergies in 2018 will be recognised in the Asset Solutions business units. Costs to deliver synergies in 2018 are expected to be c$65m, with c$40m recognised in exceptional costs and c$25m in capital spend. We remain confident of delivering annualised run rate cost synergies of at least $170m by the end of the third year following completion. In addition to cost synergies, interest costs will also benefit from improved pricing under our syndicated bank facilities and are expected to be in the range of $80m to $85m, a reduction of c$15m- $20m on the combined cost in 2017.
We are making good progress on revenue synergies and have secured work on multi-year contracts worth >$300m. This includes our contract with Saudi Aramco/SABIC to support their integrated crude oils to chemicals complex and an engineering, procurement & construction, commissioning and operations scope for upstream assets in Trinidad.
Deleveraging
Deleveraging to within our preferred range of 0.5x to 1.5x net debt to EBITDA within approximately 18 months post completion remains a key priority. Work on our deleveraging plan is continuing. Cost synergy delivery is ahead of plan and we have initiated a number of actions to improve working capital management. Our focus on capital discipline will reduce capex and intangible spend to c$80m in 2018 which includes c$25m related to cost synergies delivery. We remain focused on reducing costs to deliver synergies. The current focus of our asset disposal programme is EthosEnergy, which is likely to contribute significantly to the previously announced disposal target of at least $200m.
Dividend
Subject to approval at today’s AGM, the recommended final dividend of 23.2 cents per share will be paid on 17 May 2018. The total distribution for the year of 34.2 cents represents an increase of 3% on 2016.
A trading update for the first half of the year will be provided on 28 June 2018.
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1 Company compiled consensus comprises fourteen sell side analyst estimates published since Wood’s Full year results announcement on 20 March 2017. Consensus 2018 EBITA on a proportionately consolidated basis is $630m and the range is $619m to $643m. Consensus AEPS is 59.2c and the range is 54.6c to 64.3c. Further details are available here: (www.woodplc.com/investors/analyst-consensus-and-coverage)
2 EBITA in 2017 of $598m included significant one-off items, comprising the net impact of one-off settlements (c$70m benefit in AS EAAA) and cost overruns (c$30m split broadly equally across E&IS and Investment Services). The normalised pro forma EBITA base in 2017 was therefore c$560m.
Notes to Editors
Wood is a global leader in the delivery of project, engineering and technical services to energy and industrial markets. We operate in more than 60 countries, employing around 55,000 people, with revenues of around $10 billion. We provide performance-driven solutions throughout the asset life cycle, from concept to decommissioning across a broad range of industrial markets including the upstream, midstream and downstream oil & gas, power & process, environment and infrastructure, clean energy, mining, nuclear and general industrial sectors.
For further information contact:
Wood
Andrew Rose – Group Head of Investor Relations 01224 532 716
Ellie Dixon – Investor Relations Senior Manager 01224 851 369
Brunswick
Patrick Handley 020 7404 5959
Charles Pemberton