Aberdeen's Wood on track for revenue surge despite oil jitters

Wood, the Aberdeen-headquartered energy and engineering services group, said it was on course to meet full-year forecasts after returning to growth in 2018 while unveiling a major new US contract.
Wood CEO Robin Watson: 'good momentum'. Picture: ContributedWood CEO Robin Watson: 'good momentum'. Picture: Contributed
Wood CEO Robin Watson: 'good momentum'. Picture: Contributed

However, shares came under pressure after the firm cautioned that the recent volatility in commodity prices may “impact confidence and the pace of contract awards” within its oil and gas business.

Releasing a trading update, Wood said that full-year revenue was expected to be in the region of $10.9 billion (£8.7bn) to $11.1bn, up more than 10 per cent from the previous year, while full-year underyling earnings were likely to come in at $620 million to $630m.

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The firm, which operates in more than 60 countries and employs some 60,000 people, noted that its positive trading momentum had continued with its full-year results set to demonstrate “good organic revenue growth”. It added that it had delivered a stronger second half, reflecting its traditional bias towards the latter part of the year, boosted by the phasing of cost savings, projects and the wider market recovery.

Wood told investors: “Looking to 2019, the outlook remains generally favourable across our industrial end markets. Although our medium term outlook remains positive, in oil and gas recent volatility in commodity prices may impact confidence and the pace of contract awards.”

Chief executive Robin Watson said: “Wood returned to growth in 2018 and performance is in line with guidance. In 2018 good momentum in trading has driven revenue growth of over 10 per cent; we secured revenue synergies of over $500m and increased our cost synergy targets to over $210m. Integration is complete and our unique platform is generating strong operational cashflows which are supporting good progress on our deleveraging plan.”

The FTSE 250-listed group also said it had been awarded a major contract to deliver engineering, procurement and construction services on a “world-class” plastics manufacturing facility on the US Gulf Coast.

The five-year contract will see Wood deliver services for key infrastructure to support the facility, including an ethane steam cracker unit, feeding a monoethylene glycol unit and two polyethylene units.

Andrew Stewart, head of Wood’s asset solutions Americas business, said: “This is a strategic and significant contract to Wood.”

John Moore, senior investment manager at Brewin Dolphin Scotland, said: “Earnings have fallen slightly short of what some analysts were hoping for, but Wood’s latest update is more or less in line with expectations.

“The trading environment for the oil services market, as a whole, remains very mixed: volatility in the oil price, financial uncertainty at some operators, and cost-saving targets at certain oil majors will act as an immediate drag.”