Wood Group (John) PLC (LSE:WG.) said trading for the first 10 months of 2022 has been in line with expectations and reaffirmed its guidance for the year.
In a trading update issued ahead of today’s capital markets day, the energy services company repeated its forecast for full-year revenue of US$5.2bn-US$5.5bn, with underlying profit (adjusted EBITDA) expected to be in the middle of its US$370mln-US$400mln guidance range, after negative exchange rate movements which reduced revenue by US$200mln and EBITDA by around US$10mln.
Wood Group also outlined its new strategy and medium-term financial targets, with the focus now on “attractive end markets where we are differentiated”, such Oil & Gas and Chemicals, which are large markets with solid growth; Hydrogen and Carbon Capture, which are small markets with "substantial" growth potential; and Minerals and Life Sciences, which are large markets where the company aims to grow its share "significantly".
The combination of these markets is expected to result in the company’s revenue outperforming the combined market compound annual growth rate (CAGR) of around 5% over the medium term.
Wood Group said it expects adjusted EBITDA margins to be flat in the nearer term, partly as it reinvests in the business, while it sees an opportunity for margin improvement in the medium term.
The company predicted that adjusted EBITDA will grow at mid to high single-digit CAGR over the medium term. It forecast a return to positive free cash flow from 2024 onwards.
Its target leverage over the medium term is 0.5-1.5 times net debt, excluding leases, to EBITDA, with banking covenants set at 3.5 times.
Net debt, excluding leases, is expected to be around US$350mln-US$400mln as of 31 December 2022, which includes the recent settlement of the Enterprise litigation case for US$115mln.
"We are now taking a more focused approach to growth, targeting specific priority markets across energy and materials that best match our competitive strengths. This tighter focus will help ensure we can grow both profitably and sustainably,” said Wood Group CEO Ken Gilmartin in the statement.