Delivering a higher quality business and reconfirming outlook
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HY24 | HY23 | Movement | |
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HEADLINE RESULTS |
|
|
|
Order book1 | 6,209 | 5,991 | 3.6% |
Revenue | 2,844 | 2,986 | (4.8)% |
Adjusted EBITDA2 | 219 | 202 | 8.5% |
Adjusted EBITDA margin | 7.7% | 6.8% | 0.9ppts |
Adjusted EBIT3 | 102 | 89 | 14.2% |
Adjusted diluted EPS4 | 2.5c | 1.1c | 127.3% |
Adjusted operating cash flow5 | 51 | 39 | 29.3% |
Free cash flow6 | (168) | (219) | 23.4% |
Net debt excluding leases | 876 | 654 | 33.9% |
| |||
STATUTORY RESULTS |
| ||
Operating (loss) / profit | (899) | 23 | n/m |
Loss for the period | (983) | (27) | n/m |
Basic loss per share | (142.9)c | (4.3)c | n/m |
Cash flow from operating activities | 31 | (7) | n/m |
*See notes on page 4. Full headline results are shown on pages 13, 14 and 20
Ken Gilmartin, CEO, said:
“These results demonstrate continued progress on our turnaround. Our strategy continues to deliver higher EBITDA and a larger order book, and we are improving the quality of our business with better pricing and higher margins. Our Simplification programme is progressing at pace, with nearly half of the annualised $60 million savings from next year already secured. I am also pleased that we have achieved all of this while recording our highest level of employee satisfaction ever, putting Wood in the top quartile of all our peers and demonstrating that our team is focused and energised on driving Wood to its full potential.
“We have finalised our views on our exit from lump sum turnkey and large-scale EPC work and have reflected this in our results today, though crucially this has not changed our cash guidance. We have also recognised a non-cash goodwill impairment in our Projects business, which relates to legacy acquisitions.
“Generating sustainable, strong free cash flow continues to be an important focus for the delivery of our turnaround. Our adjusted operating cash flow was up in the period, and we continue to anticipate reducing cash drags going forward. We welcomed Arvind Balan as our new CFO in April and he has brought a renewed cash focus across the business.
“As we look ahead, we remain confident that our strategy, actions we are taking and growth potential across our markets will deliver significant value for our shareholders. We are pleased to reconfirm our outlook today, both for 2024 and 2025, including generating significant free cash flow in 2025.”
We are delivering a higher quality business
- Our growth strategy is delivering
- Adjusted EBITDA up 8.5% to $219 million
- Order book up 3.6% to $6.2 billion
- We are improving profitability
- Adjusted EBITDA margin expanded to 7.7%
- Continuation of improved pricing across our pipeline and order book
- Our Simplification programme is moving at pace
- Already secured $25 million of the targeted $60 million annualised savings from 2025 onwards, with the in-year benefit in 2024 confirmed to be around $10 million
- Finalised our views on exit from LSTK and large-scale EPC
- $140 million exceptional charge, consisting of $53 million write-off of receivable balances, $61 million of new provisions, and $26 million of final settlements (see pages 16-17)
- Anticipated cash impacts spread over many years
- No change to our cash guidance
- We continue to win exciting and complex work
- 6-year contract with Shell for the world’s largest floating offshore LNG facility in Australia
- Completed FEED for the first phase of Aramco’s carbon capture project in Saudi Arabia
- Significant sustainable solutions business7
- Sustainable solutions revenue of c.$600 million represents 21% of Group revenue
- Around 40% of factored sales pipeline now in sustainable solutions
- We continue to evolve our portfolio in line with our strategic priorities
- CEC Controls sale agreed, net proceeds of c.$30 million expected in the second half
- Disposal of Ethos Energy JV progressing well, expected to complete in the second half
We are focused on cash delivery
- We have made significant progress on our turnaround to date
- Delivered EBITDA growth above targets
- Expanded our margins and will continue to do so
- Now a higher quality business with no lump sum turnkey work remaining in our order book
- The next stage of our turnaround is to deliver cash
- Operating cash flow continues to improve
- Working capital focus year-round, with a clear plan to make significant improvements
- Cash drags will continue to reduce as outlined previously
- We are nearing the inflection point in our cash journey in 2025
- Underlying business is highly cash generative
- Pathway to significant free cash flow from 2025 onward
Reconfirmed 2024 outlook
- High single digit growth in adjusted EBITDA, before the impact of disposals
- Performance will be weighted to the second half, reflecting the typical seasonality of our business and the phasing of the in-year benefit of the Simplification programme
- Operating cash flow to continue to improve, partly through improved cash management across our business, especially given the second half weighted revenue profile of the Group this year. Exceptional cash outflows will be around $125 million, of which c.$50 million relate to our Simplification programme to deliver around $60 million of savings from 2025, and now include c.$6 million of Sidara-related costs
- Net debt at 31 December 2024 is expected to be at a similar level to 31 December 2023 after the proceeds from planned disposals, which are due to complete in the second half of this year
Reconfirmed 2025 outlook
- Adjusted EBITDA growth in 2025 above our medium-term targets, with the c.$60 million of annualised Simplification benefits on top of the originally targeted mid to high single digit growth
- We expect to generate significant free cash flow in 2025
HY24 financial highlights
- Revenue of $2.8 billion was down 5% with growth in Operations offset by lower revenue in Projects given lower pass-through activity, our strategic shift away from EPC and weakness in our minerals business
- Pass-through revenue in the period was $405 million compared to $506 million in HY23, with all the reduction in our Projects business. Excluding pass-through, Group revenue was down 2%
- Adjusted EBITDA of $219 million was up 8.5% with margin expansion more than offsetting the revenue performance, reflecting our shift to a higher quality business
- Adjusted EBITDA margin of 7.7% compared to 6.8% last year, helped by improved pricing and lower EPC and pass-through work in Projects
- Adjusted EBIT up 14.2% to $102 million
- Adjusted diluted EPS up 127.3% to 2.5c, reflects the EBIT growth and a lower tax charge
- Free cash flow of $(168) million includes the typical seasonality of our working capital profile and the expected phasing of exceptional cash flows ($75 million in the first half)
- As a result, net debt (excluding leases) was $876 million at 30 June 2024
HY24 statutory results
- Operating loss of $899 million reflects the exceptional items in the period
- Exceptional items of $966 million (pre-tax)
- $815 million impairment of goodwill and intangibles (see page 17 for details)
- $140 million losses related to our exit from LSTK and large-scale EPC work
- $12 million of Simplification costs
- $6 million of costs related to Sidara’s takeover proposals in the period
- Loss for the period of $983 million
- Basic loss per share of 142.9c
- Cash flow from operating activities of $31 million was significantly improved on last year
Presentation
A presentation with Ken Gilmartin (CEO), Arvind Balan (CFO) and Jennifer Richmond (CSO) will be webcast at 8:00am (UK time) today, followed by a Q&A session. The webcast is available at: https://edge.media-server.com/mmc/p/jjv68c9f.
The webcast and transcript will be available after the event www.woodplc.com/investors.
For further information:
Simon McGough, President, Investor Relations +44 (0)7850 978 741
Vikas Gujadhur, Senior Manager, Investor Relations +44 (0)7855 987 399
Alex Le May, Ariadna Peretz, FTI Consulting +44 (0)20 3727 1340 / FTI_Wood@FTIconsulting.com
Adjustments between statutory and underlying information
The Group uses various alternative performance measures (APMs) to enable users to better understand the performance of the Group. The Directors believe the APMs provide a consistent measure of business performance year-to-year and they are used by management to measure operating performance and for forecasting and decision-making. The Group believes they are used by investors in analysing business performance. These APMs are not defined by IFRS and there is a level of judgement involved in identifying the adjustments required to calculate them. As the APMs used are not defined under IFRS, they may not be comparable to similar measures used by other companies. They are not a substitute for measures defined under IFRS.
Percentage growth rates are calculated on actuals and not the rounded figures shown throughout this statement. Growth rates shown at constant currency are calculated by comparing HY24 to HY23 restated at HY24 currency rates.
Note 1: Order book comprises work that is supported by a signed contract or written purchase order for work secured under a single contract award or frame agreements. Multi-year agreements are recognised according to anticipated activity supported by purchase orders, customer plans or management estimates. Where contracts have optional extension periods, only the confirmed term is included. Order book disclosure is aligned with the IFRS definition of revenue and does not include Wood’s proportional share of JV order book. Order book is presented as an indicator of the visibility of future revenue.
Note 2: A reconciliation of adjusted EBITDA to operating profit is shown in note 2 to the financial statements.
Note 3: Adjusted EBIT shows the Group’s adjusted EBITDA after depreciation and amortisation. This measure excludes amortisation of acquired intangibles and is therefore aligned with our measure of adjusted EPS. A reconciliation of adjusted EBIT to operating profit/loss is shown in the Financial Review on page 13.
Note 4: A reconciliation of adjusted diluted EPS to basic EPS is shown in note 6 of the financial statements.
Note 5: Adjusted operating cash flow refers to adjusted cash generated from operations, as shown on page 20 of the Financial Review. This is a metric used by management to monitor business performance throughout the year.
Note 6: Free cash flow, a key measure of shareholder value creation, is defined as all cash flows before M&A and dividends. It includes all mandatory payments the Group makes such as interest, tax, and exceptional items. It excludes the impacts of IFRS 16 (Leases) accounting and FX. A reconciliation of free cash flow to statutory cash flow statement is shown on pages 25-26.
Note 7: Sustainable solutions consist of activities related to: renewable energy, hydrogen, carbon capture & storage, electrification and electricity transmission & distribution, LNG, waste to energy, sustainable fuels & feedstocks and recycling, processing of energy transition minerals, life sciences, and decarbonisation in oil & gas, refining & chemicals, minerals processing and other industrial processes. In the case of mixed scopes that include a decarbonisation element, for our pipeline disclosure we include the proportion of the opportunity that is related to those decarbonisation elements. For our revenue disclosure, we only include revenue if directly within sustainable solutions, with mixed scopes only included if 75% or more of the scope relates to decarbonisation.
Note 8: Various businesses have been transferred between business units in the period:
(i) Part of Life Sciences business was transferred from Consulting to Projects
(ii) Power business in the UK was transferred from Projects to Investment Services
(iii) Industrial Boilers business moved from Investment Services to Operations
(iv) Downstream & Chemicals operations business moved from Operations to Investment Services
The results for our Business Units (as shown on pages 8 to 11 have been restated for these changes. There is no impact on the Group’s total results. A summary of changes is shown on page 12.