Wood Group shares tank on 'difficult' trading update14 Feb 2025 08:46
(Sharecast News) - Shares in Wood Group were tanking on Friday morning, after it flagged weaker-than-expected fourth-quarter trading in an update, and warned of negative free cash flow in 2025.
The FTSE 250 company said it expected to report full-year 2024 adjusted EBITDA of $450m to $460m and adjusted EBIT of $205m to $215m.
It said actions taken in the fourth quarter to mitigate weaker-than-expected trading included canceling employee bonuses and actively managing working capital.
Wood noted the completed sale of EthosEnergy, generating net cash proceeds of $138m.
At year-end, net debt excluding leases was around $690m, with an average net debt of $1.1bn for the year.
The order book rose to $6.2bn as at 31 December, up from $5.4bn at the end of September, reflecting key contract wins with BP, OMV Petrom, and Esso Australia.
Wood confirmed that an independent review, led by Deloitte, was ongoing.
While its findings were not final, the firm said it did not anticipate a material impact on its cash position or future cash generation.
Provisional indications suggested prior-year adjustments would be required in relation to the Projects business unit, which could affect previously-reported adjusted EBITDA for 2023 and prior periods.
Wood said it was implementing measures to strengthen its financial culture, governance, and controls in response to identified weaknesses.
The company reiterated its strategic shift away from lump sum turnkey contracts, which had reduced revenue but eliminated exposure to further such commitments.
A cost reduction programme launched last March remained on track to deliver $60m in annualised savings in 2025, with a further $85m of savings targeted from 2026 onward.
In total, the measures aimed to reduce Wood's cost base by $145m between 2023 and 2026.
For 2025, Wood was expecting double-digit growth in adjusted EBITDA and adjusted EBIT, excluding the impact of disposals, but now forecast negative free cash flow of between $150m and $200m.
That was attributed to lower-than-expected underlying EBITDA growth, a $70m one-off working capital unwind, costs related to the independent review, and legacy claims liabilities.
It said it was planning to raise $150m to $200m from disposals to offset the cash outflow and maintain debt levels.
Average net debt was expected to remain around $1.1bn in 2025.
Looking ahead, Wood said it expected to generate positive free cash flow in 2026, driven by operating cash flow improvements, EBITDA growth, incremental cost savings, and a reduction in exceptional cash costs.
The company reiterated that its legacy claims liabilities, estimated at $150m, would be paid and extinguished over the next three years.
On refinancing, Wood noted that the majority of its debt facilities mature in October 2026.
The firm said it was conducting a detailed review of refinancing options and engaging with lenders, including assessing the implications of any p
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