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Wood Group losses narrow as revenues rose strongly in 2018

Looking to the current financial year, the oil and gas services engineer said it was “well positioned” for the growth trends emerging across its markets
oil and gas operations
It confirmed US$231mln of total dividends for 2018 - that's 35 cents per share

Sector resurgence and the positive impact of the Amec Foster Wheeler acquisition supported a 78% rise in revenue at John Wood Group PLC (LON:WG) in 2018.

The oil services engineer brought in some US$1.03bn during the 12 months ended 31 December, up from US$6.16bn in the year before. Adjusted underlying earnings (EBITDA) amounted to US$630mln for the year, up 69% from US$372mln in 2017, while operating profit was marked at US$357mln versus US$212mln in the preceding period.

READ: Wood Group sells off another US$28mln of JV interests

The FTSE 250-listed company reported a narrower net loss of US$7.6mln from US$30mln a year earlier, and it accounted for US$183mln of exceptional costs – including business integration and restructuring costs, impairment against the EthosEnergy partnership with Siemens, and pensions.

"Wood delivered good organic growth in 2018,” said chief executive Robin Watson. “We completed the integration of AFW at pace, increased cost synergy targets by 24% and unlocked new opportunities across our broader range of capabilities and sectors to secure revenue synergies of over US$600mln.

“We have delivered strong operational cash flow which has supported both a reduction in net debt of US$450mln since completion of the acquisition of AFW, and the payment of US$231mln in dividends in 2018.”

Net debt reduced by 5.8% to US$1.54bn, from US$1.64bn. The group is paying a final dividend of 23.7 US cents per share, giving a 2% increase in total dividends for the year at 35 US cents.

Positive outlook for 2019

Looking to the current financial year, the company said it was “well positioned” for the growth trends emerging across its markets.

It highlighted that its present order book stands at US$10.3bn, representing around 60% of what is forecast for the whole year, in line with expectations.

Wood Group noted that revenue growth of around 5% will give organic earnings growth, which along with US$60mln of cost synergies, is expected to grow earnings (adjusted EBITDA) in line with market expectations. The company said it is confident in its ability to generate strong free cash flow.

Shares drop, UBS rating 'under review'

In a note to clients, analysts at UBS said: “On first look, we expect consensus for FY19 to remain broadly unchanged.”

But, they added: “We think there was some market expectation that the company would push back the deleveraging target.”

The analysts noted that Wood Group has outperformed the oil services sector by 8% over the past month. UBS has its ‘neutral’ rating at 670p price target for Wood Group ‘under review’.

In afternoon trading, the firm’s shares were 9.9% lower at 539.60p. Wood Group was demoted back to the FTSE 250 index from the FTSE 100 index at the start of this week.

 -- Adds analyst comment, share price --

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