Wood, the Aberdeen-headquartered energy and engineering services heavyweight, has struck a deal to sell its nuclear business for £250 million as it looks to trim debt and focus on other areas of the business.
The sale to Jacobs also includes an agreement that the US-headquartered group will pay Wood a fee of £7.5m if the UK’s competition watchdog does not clear the deal.
Clearance is currently anticipated before the end of the first quarter of 2020.
David Kemp, Wood’s chief financial officer, said: “The sale of our nuclear business follows other recent divestments and marks a significant step towards achieving Wood’s target leverage policy.
“Although our nuclear business is a strong UK player and has performed well, we see better opportunities to develop clear global leadership positions across other parts of our business.”
The division being sold designs, delivers and maintains strategic and complex nuclear assets for customers primarily in the UK. In 2018, profit before tax amounted to $14.2m (£11.7m).
News of the disposal came as Wood delivered a 28 per cent hike in first-half operating profit, before exceptional items, to $160m and left its full-year outlook unchanged. Revenues dipped 2.6 per cent to just under $4.8 billion, while the interim divided was increased fractionally to 11.4 cents.
On a pre-tax basis, Wood – which operates in more than 60 countries – recorded a profit of $13m, swinging into the black from a loss of $52m a year earlier.
Group chief executive Robin Watson said: “Strong margin improvement and profit growth in the first half was led by activities in energy markets in the eastern hemisphere and our environment and infrastructure operations in North America, together with cost synergies.
“We also made substantial progress on our non-core asset disposal programme. With 87 per cent of 2019 revenues delivered or secured we remain confident in our full-year outlook and guidance is unchanged.
“Looking further ahead, we remain well positioned for growth across the energy and built environment markets.”
David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Debt levels have been the main cause of concern about Wood – [the] announcement of the sale of its nuclear division will go some way towards assuaging those fears.
“Overall, it’s a positive set of results for the company after a choppy 2019. Investors will have one eye on the slight fall in revenues and a marginally smaller order book, but the business remains in an encouraging position.”
Ian Forrest at The Share Centre noted: “The sale of the nuclear business makes sense in relation to focusing the business on its core strengths and also in terms of helping to reduce a high level of debt following the Amec Foster Wheeler acquisition in 2017.”
Shares in the group were fairly flat in morning trade.