Last checked at 
LONDON (Alliance News) - John Wood Group PLC on Wednesday pledged a 10% growth in its dividend payout for 2016 thanks to its sound financial position, despite forecasting earnings will fall around 20%.
The oilfield services company saw earnings before interest, tax and amortisation fall by 15% last year to USD470.0 million as the fall in oil prices that started in the middle of 2014 began to bite. The knock-on effect from the oil and gas sector is continuing to trickle through and will lead to further declines this year.
The warning on Wednesday suggests Ebita will come in at around USD376.0 million in 2016, but that is in line with current market expectations as analysts and shareholders prepare for a tough couple of years.
"Market conditions remain challenging in 2016, and we have seen further margin pressure in an environment of expected lower activity by operators. Year-to-date financial performance, although down on 2015, continues to benefit from the breadth of our offering, our focus on management of utilisation in response to demand, and structural overhead cost savings," said the company.
However, in what may be seen as a rare move in the current market, John Wood said it believes the strength of its balance sheet and ongoing cashflow generation will allow a "double digit percentage" rise to its dividend this year as the company aims to grow the payout by at least 10% this year.
If John Wood delivers that increase it would follow on from the 10% rise to the dividend in 2015 to 30.3 pence, suggesting John Wood shareholders can expect a dividend of at least 33.33 pence this year.
The company recently extended its USD950.0 million bilateral bank facilities until 2021 and managed to retain the same rates as before, providing the company with confidence its financial position is solid enough to deliver a higher payout.
"Our continued focus on reducing costs, improving efficiency and broadening our service offering through organic initiatives and strategic acquisitions, positions us as a strong and balanced business in both the current environment and for when market conditions recover," said John Wood.
Unfortunately, conditions do not seemed to have improved so far this year.
Within the engineering division, John Wood said its clients continue to sanction projects at the same "slow pace" as before. The subsea unit is securing a number of smaller contracts covering front-end engineering and design work and consultancy services due to the subdued environment and John Wood's pipeline business in the US has continued to perform well.
The underlying downstream business and its process and industrial activities within the engineering unit are performing in line with expectations.
At Wood Group PSN, the company said it is expecting "relative strength" from South and Latin America but the US shale business is likely to offset this. US shale is facing continued pressure on volumes and pricing, prompting John Wood to focus on its services targeting cost reductions for its clients.
The North Sea is also another major area for PSN, but tough conditions have continued and are placing pressure on margins.
Elsewhere across the world, PSN has been "robust" through work in Iraq, Gabon, Azerbaijan and elsewhere.
John Wood has won a string of contracts since the start of 2016, spread across Brazil, Australia, Azerbaijan, Norway, the US and across the UK.
John Wood shares were up 0.3% to 620.0 pence per share on Wednesday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
