Aberdeen's Wood Group stays upbeat despite oil price woes hitting first-half result

Wood, the Aberdeen-headquartered energy and engineering services group, has swung to a first-half loss and scrapped its interim dividend after the slump in the oil price forced it to cut thousands of jobs.

Sir Ian Wood House headquarters building in Aberdeen. Picture: Simon Price

However, chief executive Robin Watson said the business was benefiting from its diversification in recent years with “relative resilience” in areas such as chemicals and renewables.

The changes have seen Wood become less dependent on an upstream oil and gas market that just five years ago accounted for the bulk of the business.

Results for the six months to the end of June revealed revenues of just over $4 billion (£3bn), a year-on-year fall of 11.5 per cent on a like-for-like basis.

Net losses for the first half amounted to $11 million, compared to a profit of $13m a year earlier, while the company’s order book at 30 June stood at a little over $7bn, down 16.4 per cent on a like-for-like basis.

No interim dividend is being declared while uncertainty arising from the Covid-19 crisis and oil price volatility persists, the group told investors.

Wood said actions required to deliver overhead savings in excess of $200m for the full year were completed in the first half.

Among the measures undertaken were headcount reductions, temporary furloughing, reduced working hours, unpaid leave and operational salary reductions. Watson said some 5,000 posts had been removed globally.

The firm noted that more than 40,000 staff had been successfully working remotely during lockdown with others continuing to work onsite safely “supporting vital services”.

Watson said: “In the first half of 2020, we took early and decisive actions in response to the unprecedented impact of Covid-19 on the global economy and oil price volatility.

“Focusing first on the safety of our people, we took action to reduce cost, protect margins and cashflow and ensure balance sheet strength, while delivering for customers.

“We are benefiting from our broader market exposure and have seen relative resilience in two thirds of our revenue which is derived from chemicals and downstream, renewables and built environment markets.

“We have successfully protected margins and delivered trading performance at the upper end of guidance. Our objectives are to maintain full-year margins in line with 2019 and deliver strong cashflow to further reduce debt in the second half.”

David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Although Wood has swung to a small loss, there are plenty of positives to take from this update.

“Debt was a focus of investor interest given the amount of cash saved by cancelling the dividend earlier this year, and it has been reduced by nearly one-third – marking significant progress on its position a year ago.”

“There are also signs that the business is continuing to diversify its portfolio of work – winning projects in renewables and the built environment, in particular – as it seeks to lessen its reliance on the oil and gas sector.

“With earnings coming in at the upper end of guidance and good visibility over future revenues, if Wood can continue to make headway on its debt in the second half the company will be in a strong position to weather the impact of Covid-19.”

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