Energy services company John Wood Group has axed executive and employee bonuses after a poor trading performance and is taking action to address “weaknesses and failures” in past reporting of its finances.
In a trading update the Aberdeen-based company said it has taken action taken to mitigate weaker-than-expected trading in Q4, including cancelling executive and employee bonuses and actively managing working capital at year end.
It has also “de-risked” the future business away from lump sum turnkey. No such work in its revenue, order book or pipeline today. This de-risking has reduced revenue and left legacy claims liabilities to address.
A Simplification programme launched in March 2024 is on track to deliver annualised savings of c.$60 million in FY25 (with cash costs to complete of c.$15 million in FY25).
This programme has been extended to target a further c.$85 million of annualised savings from FY26 onwards, with c.$60 million benefit in FY25 (with exceptional cash costs to complete of c.$30 million in 2025)
In aggregate, these actions will reduce the cost base by c.$145 million from 2023 to 2026.
“Following these actions, the business will be on a firmer operational footing, but cash generation has yet to materialise and financial strength needs significant improvement,” said the company.
Following provisional indications from a review by Deloitte, the company is evaluating the extent of prior year adjustments.
It expects these will be required in relation to the Projects business unit and their impact on previously reported adjusted EBITDA for FY23 and any prior periods.
Wood said it is initiating steps “to strengthen significantly the group’s financial culture, governance and controls in light of material identified weaknesses and failures”.
It said the review Deloitte will need to be complete before any conclusions can be reached.
However, the company does not expect the findings to have a material impact on the group’s cash position or its ability to generate cash in the future.
Ken Gilmartin, CEO, said: “This is a difficult announcement amid our transformation. While we have made progress, I am disappointed in our financial performance. Consequently, we are taking decisive actions to ensure we can meet the opportunities we have in growing markets, principally energy.
“While the likely findings from the independent review are expected to have no material impact on the Group’s cash position and future cash generation, it clearly gives us areas to focus on and we are initiating steps now to further improve our financial culture, governance and controls.
“We have announced further actions to address the cost base of the business to right size Wood for the future, and have laid out a very clear route to positive free cash flow in 2026.
“As we look ahead, notwithstanding the challenges today, I am confident the fundamentals of this company remain strong – we are in growing markets, with considerable in-demand engineering skills, trusted client relationships, and we’re well positioned to grow the business”.
The company completed sale of EthosEnergy for net cash proceeds of $138 million.
Net debt excluding leases at 31 December 2024 of around $690 million (31 December 2023: $694 million) and average net debt in 2024 of c.$1.1 billion.
The order book increased to c.$6.2 billion at 31 December 2024, significantly improved on c.$5.4 billion at 30 September 2024.
There have been large wins in Projects and Operations including BP, OMV Petrom and Esso Australia.
It said the improved order book underpins outlook for the business and long-term growth potential.
It continues to expect good growth in 2025 supported by cost actions and it expects double-digit adjusted EBITDA and adjusted EBIT growth (excluding the impact of disposals) in 2025.
“This remains in line with market expectations, though our pathway to this now includes taking additional cost reduction measures as outlined above.”
It is targeting proceeds from disposals in 2025 of $150 million to $200 million to offset the negative free cash outflow in 2025 and maintain debt levels at 2024 levels
Estimated total cash costs of legacy claims liabilities remain around $150 million, which the company expects to pay and extinguish over the next three years
