Canadian market spooks Wood Group investors

About £300 million was wiped off the value of oil services heavyweight Wood Group today after it warned on profits from its engineering division next year.

Allister Langlands of the Wood Group. Picture: Contributed

Although a pre-close trading update noted that performance for the current year was in line with expectations, project delays offshore and weakness in the Canadian market was expected to lead to a reduction in earnings at the division of around 15 per cent in 2014.

Shares dived by almost 10 per cent to close down 79p at 718p.

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The Aberdeen-based group, chaired by Allister Langlands, had already flagged in October that work in tar sands fields in western Canada had suffered delays linked to disagreements on export routes.

David Thomas, analyst at Credit Suisse, said: “There is no getting around the fact that Wood Group’s trading update contains little to provide festive cheer.”

He expects at least a 5 per cent cut in consensus forecasts for earnings per share in 2014.

But Wood Group said its PSN division was performing well, with growth led by its US onshore shale gas business.

“The North Sea also remains a strong market in which we have secured nine contract renewals over the last 12 months, providing good revenue visibility and helping maintain our leading position,” it added.

In international markets, performance continues to be held back by issues with a contract in Oman but the firm said underlying performance there has improved.

The group stressed it had a strong balance sheet and said it continued to pursue “organic and acquisition led growth”.

It told investors: “We remain confident of achieving 2013 performance in line with expectations. In 2014, the mix of opex and capex activities in our business and the contribution from completed acquisitions is expected to lead to growth overall, with growth in Wood Group PSN offsetting the reduction in Wood Group Engineering.”

Wood Group also announced today that non-executive Neil Smith will retire from the board at the end of the year after nine years’ service.