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(Alliance News) - John Wood Group PLC on Tuesday backed guidance despite first-half losses ballooning, just weeks after a Dubai suitor walked away from a GBP1.56 billion proposed takeover.
In the six months to June 30, the Aberdeen-based oilfield and engineering services firm said its pretax loss from continuing operating was USD961.7 million, widened from a USD26.0 million loss a year prior.
John Wood said this primarily reflects an impairment of goodwill of USD815 million and USD140 million of charges related to the exit of lump sum turnkey and large-scale engineering, procurement & construction work.
It added that the goodwill impairment relates to legacy acquisitions and reflects both higher discount rates - due in part to increased market volatility - and a more prudent view on growth assumptions, partly reflecting the geo-political environment in its markets.
The firm made the strategic decision to exit the lump sum turnkey and large-scale EPC work in 2022. John Wood explained that the exit has taken time, with multiple contracts being wound down.
The anticipated cash impacts of the USD140 million charges are spread over many years and are included in unchanged cash guidance, John Wood said.
Adjusted earnings before interest, taxes, depreciation and amortisation climbed 8.5% to USD219 million from USD202 million. The adjusted Ebitda margin improved to 7.7% from 6.8%.
First half revenue fell 4.8% to USD2.84 billion from USD2.99 billion, with growth in Operations offset by lower revenue in Projects. This was due to lower pass-through activity, the strategic shift away from EPC, and weakness in the minerals business.
The order book at June 30 was USD6.21 billion, up 3.6% from USD5.99 billion a year prior.
Chief Executive Ken Gilmartin said the results demonstrated "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."
Gilmartin said John Wood's "simplification' programme is progressing "at pace", with nearly half of the annualised USD60 million savings from next year already secured.
Free cash flow improved to an outflow of USD168 million from USD219 million a year ago and the firm said it anticipates "reducing cash drags going forward".
The firm reiterated its outlook both for 2024 and 2025, including generating "significant free cash flow in 2025".
For 2024, John Wood expects high single digit growth in adjusted Ebitda, before the impact of disposals.
Operating cash flow is predicted to continue to improve with cash outflows of around USD125 million, of which around USD50 million relate to the simplification programme.
For 2025, John Wood expects adjusted Ebitda growth in above its medium-term targets, with the around USD60 million of annualised simplification benefits on top of the originally targeted mid to high single digit growth.
John Wood said it will face costs of around USD11 million related to the proposed takeover attempts by Dubai-based Dar Al-Handasah Consultants Shair & Partners Holdings Ltd, known as Sidara. Some of these will be partially reimbursed by Sidara under an agreement for external costs coverage.
Sidara walked away from a deal two weeks ago, blaming global market turmoil and geopolitical risks, having put forward four takeover proposals.
The final approach valued Wood Group at around GBP1.56 billion.
In its half-year results, John Wood said: "We do not believe that those geopolitical risks pose a material risk to Wood, nor the long-term value of the group."
Wood Group was also the subject of a buyout approach by private equity firm Apollo last year, another drawn out process. Apollo's final tilt was worth GBP1.68 billion, or 240p per share, which was rejected.
Shares in John Wood were down 0.4% at 132.10p each in London on Tuesday morning.
By Jeremy Cutler, Alliance News reporter
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