'Story of transformation' for Aberdeen giant Wood Group - $1 billion loss and 700 job recruitment drive
“Both these bids were unsolicited but clearly both of them saw something in our business that was attractive to them” – Ken Gilmartin, CEO
Wood Group, the Aberdeen-headquartered engineering services heavyweight, is pushing ahead with its turnaround plans and recruitment drive despite racking up a loss of almost $1 billion just weeks after rejecting a takeover approach from a Dubai-based suitor.
The FTSE 250 group also revealed a multi-million-dollar hit from the abandoned takeover swoop but pointed to a growing order book and stronger underlying earnings as it progresses with its “simplification” programme.
Chief executive Ken Gilmartin said margins were up as “higher quality work translated into better returns”, while employee satisfaction had risen to its highest level, putting Wood in the top quartile of all its peers. The group employs some 37,000 people worldwide, with about 4,500 of the 6,500-strong UK workforce supporting North Sea operations in Scotland. It is looking to fill some 700 vacancies in the UK as it tackles complex projects such as carbon capture.
“This is a story about the transformation that we are undertaking,” Gilmartin said. “We are 18 months into what we always said would be a three-year turnaround. The headline for me is that we are on track.”
The firm will face costs of around $11m related to a series of proposed takeover attempts by Dubai-based Sidara, whose final approach valued Wood at more than £1.5bn. It said some of the costs would be partially reimbursed by Sidara under an agreement for it to cover external costs.
The latest approach came after US private equity suitor Apollo Management dropped its proposed takeover of Wood last year. Apollo had put forward a series of bid proposals, with the final one for 240p a share in cash, valuing the Scots group at almost £1.7bn.
Gilmartin said: “Both these bids were unsolicited but clearly both of them saw something in our business that was attractive to them. We will always say that we are significantly undervalued but the company has remained absolutely laser focused on the strategy that we set out.”
The group posted a statutory loss of $983 million (£758m) for the six months to the end of June, compared with just $27m a year earlier. It came as it booked hefty one-off costs and a large write-down on the value of past acquisitions. Although revenues fell 4.8 per cent to just over $2.8 billion, its underlying earnings were up 8.5 per cent to $219m. The order book swelled to a little over $6.2bn, a year-on-year rise of 3.6 per cent.
John Moore, senior investment manager at wealth firm RBC Brewin Dolphin, said that despite the headline loss for the first half, Wood was generating better cash flow which would help in its “path to recovery”.
He added: “The company has been going through a lot of change against a mixed industry backdrop, and the combined costs related to that process have seen Wood swing to a loss. But, there was a reason Wood attracted so many bids at a significant premium to its current share price - and there are hints of why in the company’s outlook for 2025, which indicate that strong free cash flow and greater profitability are on the horizon.”
Adam Vettese, market analyst at investment platform eToro, noted: “The firm has reaffirmed guidance but no doubt question marks will remain after another failed bid with shareholders seeking the opportunity for additional returns which has gone begging once again. The board will be under even more pressure to deliver.”
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