Wood Group (John) Plc (LON:WG), today announced full year results for the year ended 31 December 2018.
“Wood delivered good organic growth in 2018. We completed the integration of AFW at pace, increased cost synergy targets by 24% and unlocked new opportunities across our broader range of capabilities and sectors to secure revenue synergies of over $600m. We have delivered strong operational cashflow which has supported both a reduction in net debt of $450m since completion of the acquisition of AFW, and the payment of $231m in dividends in 2018. We have built a unique platform and are in the early stages of what we can achieve. Our performance in 2018 has strengthened our conviction in Wood’s potential and we are excited about our prospects. We are confident of achieving further growth in 2019.”
Robin Watson, Chief Executive
Financial performance
· Return to growth and ahead of 2018 consensus: Revenue including joint ventures up 12% and adjusted EBITA up 5% vs Pro forma 2017 reflecting good trading momentum and cost synergy delivery of $55m
· Operating profit before exceptional items increased by 68% to $357m (2017 proforma: $212m), after non-cash amortisation charges of $249m5
· Loss for the period reduced to $7.6m (2017: $30.0m), after exceptional costs of $183m related to synergy delivery, restructuring, impairment of EthosEnergy and guaranteed minimum pensions6
· Strong balance sheet: Net debt reduced to $1.5bn in line with guidance at December trading update. Total facilities headroom of $1.3bn. Net debt : Adjusted EBITDA reduced to 2.2x (2017: 2.4x)
· Cash conversion, calculated as cash generated from operations (after exceptional items) as a percentage of Adjusted EBITDA (excluding JVs), improved significantly to 102% (proforma 2017 14%), including $154m drawn down from our receivables facility
· Good progress on non core asset disposal programme; entered agreements to dispose of assets for consideration of over $50m to date
· AEPS of 57.4 cents up 8% and ahead of 2018 consensus3
· Proposed final dividend of 23.7c up 2% in line with progressive dividend policy; dividend cover of 1.6x $231m distributed to shareholders in 2018
Operations and integration
· Higher activity levels across all business units:
o Growth in ASA in power, downstream & chemicals and US shale
o ASEAAA grew in operations solutions work in Asia Pacific and the Middle East
o STS delivered increased activity in minerals processing, automation & control and nuclear
o E&IS saw increased consultancy work with long standing customers in North America
· Well aligned operational cultures enabled integration ahead of schedule in 12 months
· Excellent progress on cost synergies: in year benefit of $55m in 2018 equating to an annualised run rate of $85m, three year target increased to $210m, up 24%
· Secured revenue synergies >$600m; strong pipeline of opportunities
· Enhanced risk management framework and project delivery governance embedded
Outlook for 2019
· Well positioned for growth trends emerging across a broad range of energy and industrial markets
· Order book currently stands at $10.3bn4, c60% of forecast FY2019 revenue secured in line with expectations for this point in the year. Reimbursable work is the largest element; c70%.
· Revenue growth in the region of 5% will deliver organic earnings growth which, together with the impact of cost synergies of around $60m, is expected to lead to growth in Adjusted EBITA in line with market expectations3
· Deleveraging to 1.5x Net debt to Adjusted EBITDA7 will be more gradual than originally anticipated due to impact of slower sector recovery in oil & gas since completion, working capital commitments on the legacy AEGIS contract and slower progress on non-core asset disposals due to our focus on value
· Confident in the strong free cashflow generation of our business. Further deleveraging primarily driven by earnings growth in 2019, delivering cash conversion after exceptional items at c80%-85%, retaining capital discipline and the timing of additional disposals.
