Wood Group profits slide on Amec acquisition costs
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The Aberdeen-based group posted a profit of $6 million (£4.7m) for the six months to the end of June, down from $45m for the same period last year.
Earnings were hit by exceptional charges of $47.6m, including $25.2m of costs relating to the £2.2 billion takeover of Amec, which is due to complete by the end of this year.
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Hide AdThe takeover is expected to trigger about 1,100 job losses from a combined headcount of 60,000, and Wood Group chief executive Robin Watson said the cuts would be “pretty well distributed around the globe”.
Announced in March, the deal is targeting annual cost savings of “at least” $170m, but will trigger one-off costs of about $231m in the first three years after completion. The new entity will be valued at about £5bn.
Watson: “As we get near completion, we’re very excited about the prospect of bringing the two businesses together. We’re confident of getting the deal completed in the fourth quarter. We’re working very well with our Amec Foster Wheeler opposite numbers – we’ve now got 100 people working across both organisations on some detailed integrated planning.”
He added: “Scale is one thing, but having a FTSE 100 company based in Scotland is a prerequisite for us in terms of doing the transaction. We’re really hopeful of a good news story for the Scottish economy as a whole.”
Under the deal, the headquarters of the enlarged group will be established in Aberdeen, with some head office roles moving to the Granite City, and Watson said: “It won’t be a shadow head office that is really operated out of London.
Today’s results reflected mixed market conditions across Wood’s business, with the “challenging” North Sea environment offsetting a “robust” performance elsewhere.
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Hide AdWatson added: “Our full-year outlook is unchanged and we anticipate a stronger second-half performance. In June, shareholders overwhelmingly approved our offer for Amec Foster Wheeler, which will accelerate our strategy to create a global leader in project, engineering and technical services across a broad range of industrial sectors, the largest of which will be oil and gas.
“We remain on track to complete the transaction in the fourth quarter.”
The Competition & Markets Authority is considering proposals that would see Amec sell off “almost all” the assets that contribute to the supply of UK upstream oil and gas engineering and construction services, as well as operation and maintenance services in the North Sea, and Watson said a shortlist of “very credible” potential buyers has now been drawn up.
He added: “We’re certainly confident that getting that down to one individual buyer won’t be an issue.”
In the group’s Asset Life Cycle Solutions eastern region, which includes the North Sea and Kazakhstan, headcount fell by almost 11 per cent from a year ago to stand at 15,600.
Watson told The Scotsman: “While we’re still in challenging markets, since the turn of the year our headcount has increased across the group. The UK still has 8,000-plus people and it’s still material in our business.”
He added that the group has been expanding its workload away from the North Sea, with recent deals including a contract from BAE Systems to carry out work on the Royal Navy’s Astute class submarines based in Barrow-in-Furness.
Total revenues were down 11 per cent at $2.3bn, but Wood declared a 3 per cent rise in its interim dividend to 11.1 cents a share, to be paid on 28 September.
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Hide AdToday’s results come after Wood said it had won a five-year, multimillion-dollar contract at a US refinery.
The contract, awarded by Texas-based oil business Phillips 66, will see 175 Wood employees carry out maintenance work at the Sweeny refinery, where the group has provided services for more than 20 years.