John Wood Group Plc (LON:WG.) is cancelling its final dividend for 2019, retaining US$160mln, as it attempts to protect its balance sheet.
Robin Watson, Wood Group chief executive, described the decision as “prudent and appropriate”.
"Like many companies, Wood is being affected by the unprecedented event of Covid-19 and its impact on the global economy - an event compounded by the sharpest decline in oil price in 20 years,” Watson said in a statement.
He added: “Today we announce a series of actions which keep our people safe and healthy and will further protect our business and our stakeholders by reducing cost, protecting cashflow and ensuring continued balance sheet strength.”
The engineering and services group told investors it still had “considerable” financial headroom and liquidity (about US$1.4bn), and, has access to financing facilities (close to US$2bn in aggregate).
Wood said it has decided to take “early action” in response to the challenging industry conditions, though it is still too early to quantify the impacts of Covid-19 and the impacts of crude oil’s price collapse.
Oil and gas business presently accounts for about 30% of Wood's revenues, following diversification efforts that have added environmental, renewable energy and other consultancy business to the mix. That has seen the reliance on petroleum reduce significantly from around 90% five years ago, when the sector was last in turmoil.
It also announced that management - the board, executive directors and senior leaders - have elected to take a 10% reduction in base salary, and, a further group of employees are being asked to do the same. Altogether the company expects this will save around US$40mln in 2020.
On top of that, further staff side savings are also being made via redundancies, temporary furloughs, unpaid leave and other operational salary reductions.
Wood is pausing the implementation of its ERP (enterprise resource planning) system - which enables site monitoring and analytics – and other discretionary capex in order to save US$20-25mln this year.