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LONDON (Alliance News) - John Wood Group PLC Tuesday reported a fall in profit in the first half of 2015 as expected but the company reaffirmed its commitment to grow the dividend and reiterated its full year outlook remains unchanged.
The FTSE 250-listed oil engineering services company reported a expected fall in profit before tax and exceptional items to USD156.3 million in the first half of 2015, compared to a USD182.4 million profit a year earlier as revenue dropped to USD3.06 billion from USD3.80 billion.
Earnings before interest, tax and amortisation came in at USD225.9 million from USD243.9 million, and the company said its outlook for the full year remains unchanged with Ebita expected to be in line with expectations.
To put the results into perspective, an analyst consensus provided by the company estimates John Wood will generate full year revenue of USD6.80 billion, leading to an Ebita of USD465.0 million and a pretax profit of USD355.0 million.
The company, like its peers, has been suffering from a lull in activity in the oil and gas sector as companies cut back on expenditure and investments in light of lower oil prices.
Despite the fall in earnings, the company upped its interim dividend to 9.8 cents per share from 8.9 cents per share a year earlier. That is in line with its policy and it reaffirmed its commitment to increase the dividend per share by a double digit percentage from 2015 onwards.
The company said it continues to lower costs in response to the downturn in the oil and gas sector, and said it has achieved USD40 million worth of overhead cost savings in the first half, which is "significantly ahead" of estimates.
That overhead reduction partially offset the effect of reduced activity on earnings as it pushed its Ebita margin to 7.4% from 6.5% a year earlier.
The company has previously announced it would be lowering its headcount, and said this is down 13% from December and 17% from June 2014.
"We anticipate that the full year benefit of overhead cost savings will be in excess of USD80 million and that the impact of these savings will endure in 2016," said the company.
"To achieve this, we have reduced headcount and discretionary spending, put tighter controls in place, accelerated shared service programmes, and are continuing with our pursuit of back office efficiencies," it added.
In addition to the cost cutting, John Wood has also significantly trimmed its net debt to USD277.2 million at the end of June from USD427.4 million at the end of June 2014. That net debt figure includes its joint ventures and is at the "lower end" of its target.
"Conditions in oil and gas markets remain very challenging. Performance in the first half demonstrates our commitment to cost discipline and the resilience and flexibility of Wood Group's through cycle model. Our outlook for 2015 overall remains unchanged and we anticipate that full year performance will be in line with analyst consensus," it said.
Its two main divisions both suffered a decline in revenue in the first half. The PSN division, which provides commissioning and decommissioning services, reported a 21.7% fall in revenue from reduced activity, particularly in the Americas.
The engineering division entered 2015 "with a reasonable backlog" but revenue was still down 10.9% year-on-year.
The improved Ebita margin partially offset pricing pressures and reduced revenue in both divisions, it said.
In a separate statement Tuesday, the company said it has won a five-year "multi million dollar" contract with major Royal Dutch Shell PLC to provide services to four onshore oil fields in Gabon. That will be carried out by Wood Group PSN and the deal represents the subsidiary's first major contract in Gabon.
John Wood shares were down 1.1% to 573.00 pence per share on Tuesday morning, one of the worst performers in the FTSE 250.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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