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(Alliance News) - John Wood Group PLC on Tuesday declared no dividend for the first half of 2020, as profit fell below the USD1 million mark on reduced activity levels and a double-digit decline in revenue.
For the six months to the end of June, the oilfield services company posted a pretax profit of around USD900,000, a sharp fall from USD62.2 million the year before.
Before exceptional items, which including redundancy and restructuring costs, and an updated discount rate on an asbestos-related provison, pretax profit dropped by 60% to USD36.1 million from USD91.1 million.
The asbestos provision related to lower US bond rates leading to significantly reduced discount rates.
John Wood's revenue meanwhile, declined by 15% to USD4.09 billion from USD4.79 billion the prior year, as lower upstream and midstream activity was exacerbated by the Covid-19 crisis which mainly affected the second quarter of 2020. On a like-for-like basis, revenue still dropped by 12% to USD4.01 billion.
Due to uncertainty around the Covid-19 pandemic, volatility in oil prices and a focus on keeping its balance sheet robust, the group will not pay an interim dividend.
At the end of June, John Wood's order book was USD7.05 billion, down 16% from USD8.43 billion the same date the prior year, as the group expects lower levels of short-cycle work coming to the market.
Looking ahead, John Wood said it expects activities in chemicals & downstream and renewables to remain resilient, helping to mitigate challenges in the upstream and midstream businesses. Although there are recent signs of stabilisation, risks of downward scope variations, deferrals and cancellation of secured work remains.
"We are benefiting from our broader market exposure and have seen relative resilience in two-thirds of our revenue which is derived from chemicals & downstream, renewables and built environment markets. We have successfully protected margins and delivered trading performance at the upper end of guidance while reducing net debt as a result of portfolio optimisation and steps taken to protect cashflow. Our objectives are to maintain full-year margins in line with 2019 and deliver strong cashflow to further reduce debt in the second half," said Chief Executive Robin Watson.
Shares in John Wood were up 6.1% at 225.10 pence on Tuesday in London, among the best performers in the FTSE 250.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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