Why shares in Scottish engineering giant Wood Group have plummeted to more than 20-year low

Engineering firm Wood Group has seen its shares plummet to a more than 20-year low after launching a review of the business following recent write-downs on projects.

The Scottish group, which provides oilfield and engineering services, saw its shares slump as much as 49% in mid-morning trading on Thursday after it said Deloitte would carry out an independent review.

It said: “This review will focus on reported positions on contracts in projects, accounting, governance and controls, including whether any prior year restatement may be required.

Engineering firm Wood Group has seen its shares plummet to a more than 20-year low after launching a review of the business following recent write-downs on projects. | Wood Group

“An update will be provided as appropriate following its conclusion.”

It marks the latest blow for the FTSE 250-listed group after its shares went sent reeling in August when a Dubai suitor walked away from a £1.56 billion proposed takeover.

It saw rival Sidara abandon plans for a deal, blaming global market turmoil and geopolitical risks, having put forward four takeover proposals.

Just weeks later, Wood Group also revealed it slumped to a 961.7 million US dollars (£745.3 million) loss having booking write-downs on large scale projects.

In its latest trading update on Thursday, the group said it was another “mixed quarter” with underlying earnings lower than a year earlier due to the projects hit, as revenues edged up 1% to 1.5 million US dollars (£1.2 million).

Ken Gilmartin, chief executive of Wood Group, said: “Our projects business delivered a disappointing quarter, impacted by delayed awards in our chemicals business and our continued weakness in minerals and life sciences.

“As such, we continue to take actions to redress this underperformance.”

The firm is ploughing ahead with a plan to cut annual costs by around 60 million US dollars (£46.5 million).

The latest share price woes deal yet another blow to investors who have suffered a languishing share price and a number of failed takeover attempts for the company in recent years.

Wood Group was also the subject of a buyout approach by private equity firm Apollo last year, worth £1.68 billion, or 240p per share, which it also rejected.

The bid from Dubai-based engineer Sidara fell through earlier this year and in August, Wood Group cited “rising geopolitical risks” and “financial uncertainty” for the withdrawal and months of speculation.

The firm faced costs of around $11m related to that series of proposed takeover attempts by 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.

In the wake of those failed bids, 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.”