Wood cuts wages by $40m and cancels dividend to navigate virus-driven oil price slump

Wood, the Aberdeen-headquartered energy and engineering services heavyweight, is implementing a $40 million (£32m) pay cut as it targets cost savings to combat the coronavirus-driven downturn in oil prices.

Wood CEO Robin Watson said the decision to cancel the annual dividend was 'prudent and appropriate'.

Executive directors and senior leaders at the group have elected to take a voluntary, temporary 10 per cent reduction in base salary, while “an additional group of employees” is being asked to do the same.

The FTSE 250-listed firm estimates this will generate overhead savings of $40m for the year.

Alongside this, Wood will reduce headcount and furlough workers while offering unpaid leave in certain areas of its operations as it attempts to mitigate the sharpest fall in oil prices for 20 years and the impact of the Covid-19 outbreak.

The group has also cancelled its dividend, making it the latest in a string of FTSE majors to pull shareholder payouts in an attempt to shore up the balance sheet.

The final dividend for 2019 of 23.9 cents per share, recommended last month, will be cancelled at a saving of $160m.

The business anticipates that some of its order book will be either cancelled or delayed due to the virus. At the end of February, before the recent fall in oil prices, Wood’s order book stood at $8 billion with around 70 per cent of 2020 activity delivered or secured.

New order intake is forecast to slow due to the impact of the virus and lower oil prices.

Wood said it has paused the implementation of its new enterprise resource planning system and other capital expenditures to save an additional $20m to $25m.

Chief executive Robin Watson said: “Like many companies, Wood is being affected by the unprecedented event of Covid-19 and its impact on the global economy – an event compounded by the sharpest decline in oil price in 20 years.

“Our strategy has led to a substantial broadening of our business across energy and built environment markets, reducing our reliance on any one industry or sector.

“Today we announce a series of actions which keep our people safe and healthy and will further protect our business and our stakeholders by reducing cost, protecting cashflow and ensuring continued balance sheet strength.

“This includes the board’s prudent and appropriate decision to withdraw its recommendation to pay the proposed 2019 final dividend.”

The board has postponed its annual general meeting in light of the Covid-19 pandemic.

Last month Wood unveiled a 15 per cent increase in operating profits before exceptional items to $411m in the year to 31 December.

Wood sealed the sale of its nuclear business to US firm Jacobs at the beginning of March.

The group said the cash proceeds from the nuclear divestment and the recent sale of its industrial services business had generated a total of $429m.

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