Wood Group (J) Regulatory News (WG.)

This announcement contains inside information

Strong growth in first year of new strategy; upgrading outlook

*FY22 results have been re-presented to include Built Environment Saudi Arabia. Built Environment Consulting (sold in 2022) is treated as a discontinued operation and its results are included within the "Total group" measures. Continuing results exclude its results. See notes on page 4.

Ken Gilmartin, CEO, said:

"We made significant progress in this first year of our three-year growth strategy. We delivered strong revenue and adjusted EBITDA growth, and we significantly improved operating cash flow.

"We continue to see clear business momentum, with a higher order book, double-digit growth in our pipeline and positive pricing trends in both pipeline and order book. It is encouraging that the fastest growing parts of Wood are the higher-margin Consulting business, and our sustainable solutions across all areas.

"To build on this early success and further enhance our strategic delivery, we have launched a simplification programme to drive efficiency and support further margin expansion. We are therefore upgrading our outlook, with 2024 guidance now towards the top end of our medium-term targets and 2025 expected to exceed those targets. Ultimately, our priority remains sustainable cash generation and we expect to deliver significant free cash flow from 2025."

Strategic progress and strong growth in the first year of our strategy

· Delivered results in line with expectations

o  Revenue growth across all business units

o  Strong adjusted EBITDA growth, in line with guidance

· Continued momentum

o  Fastest growth in Consulting and across sustainable solutions

o  Order book up 4% to $6.3 billion, up 7% like-for-like14

o  Double-digit growth in our factored sales pipeline

o  Improving pricing trends across pipeline, order book and in margin performance in 2023

o  Adjusted operating cash flow improved to $194 million, up $260 million on last year

· Growing our sustainable solutions business to $1.3 billion15

o  Sustainable solutions revenue up 15% and represented 22% of Group revenue

o  43% of factored sales pipeline now in sustainable solutions

Simplification to enhance strategic delivery

· Focus on driving higher margins through continued growth, evolving our business mix with faster growth in Consulting, improved pricing and taking action on cost

· Simplification programme to drive efficiency

o  Targeting annualised savings of around $60 million from 2025

o  Initial focus on central costs, with benefit within FY24 expected to be around $10 million

o  Will improve both EBITDA and EBIT margins, and future cash generation

o  Cash costs to complete of c.$70 million over next 12 months, exceptional P&L charge in FY24

· Aligning our portfolio with our strategy

o  Sale process for EthosEnergy progressing well, smaller disposals expected to follow

Upgraded 2024 outlook

· Adjusted EBITDA growth towards the top end of mid to high single digit target (before disposals)

o  Margin expansion driven by topline growth, evolving business mix and improved pricing, plus the c.$10 million in-year benefits of our simplification programme

o  Performance will be weighted to the second half, reflecting the typical seasonality of our business and the phasing of the in-year benefit of the simplification programme

· Cash performance to continue to improve

o  Operating cash growing at a faster rate than adjusted EBITDA will help deliver positive free cash flow before exceptional cash flows

o  Exceptional cash flows are expected to be around $120 million and will be weighted to the first half. They now include c.$50 million related to the delivery of the simplification programme

o  Net debt at December 2024 expected to be lower than December 2023 after the expected proceeds from planned disposals

Upgraded medium-term outlook

· The simplification programme is expected to add to our growth potential, leading to EBITDA growth in 2025 above our medium-term target

· We will continue to expand our EBITDA margin and that benefit will translate into our EBIT margins and support a significant increase in our earnings per share over the medium term

· We are on-track to deliver significant free cash flow in 2025, as previously guided

· From 2025, our sustainable free cash flow generation, combined with proceeds from disposals, will provide increased flexibility in our capital allocation policy

FY23 financial highlights

· Revenue of $5.9 billion was up 8% (+9% at constant currency) with growth in all business units, including a c.$200 million increase in pass-through revenue

· Adjusted EBITDA of $423 million was up 9% on last year (+11% at constant currency) with good growth across all business units

· Adjusted EBITDA margin of 7.2%, up 0.1ppts on last year, reflecting business mix and improved pricing partly offset by the increased pass-through revenue and opex investments

· Adjusted EBIT up 4% to $185 million with EBITDA growth partly offset by higher lease depreciation and software amortisation

· Adjusted diluted EPS of 2.3c was an improvement on last year's (3.1)c, reflecting the higher adjusted EBIT and lower finance costs

· Adjusted operating cash flow of $194 million was significantly improved on last year, up $260 million

· Free cash flow of $(265) million reflects the improved operating cash flow offset by capex, interest and tax paid, plus cash exceptionals broadly in line with our guidance at $145 million

· Net debt (excluding leases) at 31 December 2023 was $694 million, higher than at 31 December 2022 ($393 million) given the free cash outflow and the payment of $65 million of tax on the sale of Built Environment Consulting

FY23 statutory results

· Operating profit of $38 million compares to an operating loss in the prior year

· Exceptional items of $77 million include a $45 million charge relating to a receivables write-down and an arbitration claim in the now closed Power and Industrials EPC business. Also includes $29 million of charges related to our asbestos liability. Full details on pages 16-17

· Loss for the period of $105 million reflects operating profit more than offset by finance costs and tax

· Basic EPS of (16.1)c reflects the loss for the period

· Cash flow from operating activities of $48 million, a significant improvement on the outflow in 2022

CFO succession

Arvind Balan will join Wood as Chief Financial Officer (CFO) on 15 April 2024, replacing David Kemp who will retire from the Board on 14 April 2024. David will remain with Wood for a period of time to ensure a smooth transition.

Presentation

A presentation with Ken Gilmartin (CEO) and David Kemp (CFO) will be held at 9:00am today in London, UK. This event will also be webcast at https://edge.media-server.com/mmc/p/ngex5be8.

The webcast and transcript will be available after the event at www.woodplc.com/investors.

The person responsible for arranging the release of this announcement on behalf of Wood is Martin McIntyre, Company Secretary.

Future events

· 9 May 2024 - Q1 trading update and Annual General Meeting

· 11 July 2024 - HY24 trading update

· 20 August 2024 - HY24 results

· 7 November 2024 - Q3 trading update

NOTES

Adjustments between statutory and underlying information

The Group uses various alternative performance measures (APMs) to enable users to better understand the performance of the Group. The Directors believe the APMs provide a consistent measure of business performance year-to-year and they are used by management to measure operating performance and for forecasting and decision-making. The Group believes they are used by investors in analysing business performance. These APMs are not defined by IFRS and there is a level of judgement involved in identifying the adjustments required to calculate them. As the APMs used are not defined under IFRS, they may not be comparable to similar measures used by other companies. They are not a substitute for measures defined under IFRS.

Note 1: FY22 results are re-presented to include the results of Built Environment Consulting Saudi Arabia, which was previously classified as held for sale. For FY22, this business contributed $27 million of revenue and $3 million of adjusted EBITDA.

Note 2: Percentage growth rates are calculated on actuals and not the rounded figures shown throughout this statement. Growth rates shown at constant currency are calculated by comparing unaudited FY23 to FY22 restated at FY23 currency rates.

Note 3: Built Environment Consulting (sold in September 2022) is treated as a discontinued operation and its results are included within the "Total group" measures. Continuing results exclude its results.

Note 4: A reconciliation of adjusted EBITDA to operating profit is shown in note 1 to the financial statements.

Note 5: Adjusted EBITDA margin is adjusted EBITDA shown as a percentage of revenue. This measure is used by management to measure the performance of business, and is one of our medium-term targets.

Note 6: Adjusted EBIT shows the Group's adjusted EBITDA after depreciation and amortisation. This measure excludes amortisation of acquired intangibles and is therefore aligned with our measure of adjusted EPS. A reconciliation of adjusted EBIT to operating profit/loss is shown in the Financial Review on page 13.

Note 7: Adjusted EBIT margin is adjusted EBIT shown as a percentage of revenue. This measure is used by management to measure the performance of business.

Note 8: A reconciliation of adjusted diluted EPS to basic EPS is shown in note 9 of the financial statements.

Note 9: Adjusted operating cash flow refers to adjusted cash generated from operations excluding leases, as shown on page 20 of the Financial Review. This is a metric used by management to monitor business performance throughout the year.

Note 10: Free cash flow is defined as all cash flows before acquisitions, disposals and dividends. It includes all mandatory payments the Group makes such as interest and tax, and all exceptional cash flows. It excludes the impacts of IFRS 16 (Leases) accounting and FX. A reconciliation of free cash flow to our statutory cash flow statement is shown on page 26. Free cash flow is a key measure of delivering value to our shareholders.

Note 11: Net debt / adjusted EBITDA ratio (covenant basis) is calculated on the existing basis prior to the adoption of IFRS 16 in 2019 and is based on net debt excluding leases. It includes a series of covenant adjustments to both net debt and EBITDA. The calculation is shown in the Financial Review on page 24. This measure is a key metric used in our debt covenants.

Note 12: Order book comprises revenue that is supported by a signed contract or written purchase order for work secured under a single contract award or frame agreements. Multi-year agreements are recognised according to anticipated activity supported by purchase orders, customer plans or management estimates. Where contracts have optional extension periods, only the confirmed term is included. Order book disclosure is aligned with the IFRS definition of revenue and does not include Wood's proportional share of joint venture order book. Order book is presented as an indicator of the visibility of future revenue.

Note 13: Headcount is a measure of total employees working for Wood, including Wood employees and contractors. This measure excludes employees in our joint ventures.

Note 14: Excluding the Gulf of Mexico labour operations business sold in March 2023. Order book at constant currency.

Note 15: Sustainable solutions consist of activities related to: renewable energy, hydrogen, carbon capture & storage, electrification and electricity transmission & distribution, LNG, waste to energy, sustainable fuels & feedstocks and recycling, processing of energy transition minerals, life sciences, and decarbonisation in oil & gas, refining & chemicals, minerals processing and other industrial processes. In the case of mixed scopes that include a decarbonisation element, for our pipeline disclosure we include the proportion of the opportunity that is related to those decarbonisation elements. For our revenue disclosure, we only include revenue if directly within sustainable solutions, with mixed scopes only included if 75% or more of the scope relates to decarbonisation.

CEO STATEMENT

We made significant progress in the first year of our three-year profitable growth strategy. The focus in year one was to return to growth and deliver results in line with our guidance. We achieved strong growth in adjusted EBITDA and improved our margin, both of which exceeded our expectations at the start of the year.

Strong growth in the first year of our growth strategy

Revenue growth across all businesses

Group revenue of $5.9 billion was broadly in line with our guidance, up 8% on last year (up 9% at constant currency) with growth across all of our business units, led by Consulting. This growth shows the demand that is in our markets for the consulting and engineering services we provide. Around a third of our revenue growth reflected increased pass-through activity, for which we earn little or no margin.

Strong adjusted EBITDA growth

Our adjusted EBITDA of $423 million was up 9% on last year, and up 11% at constant currency, reflecting the strong revenue growth combined with an improved margin of 7.2%. This margin performance reflects an improved business mix, as we shift our business model more and more towards consulting and engineering services, and improved pricing across our business. The margin performance included the increased opex investments we made to drive future growth, and the dilutive impact of the increased pass-through revenue.

Our adjusted EBIT was up 4% on last year at $185 million, reflecting the growth in EBITDA offset by higher lease depreciation and software amortisation. Our adjusted diluted EPS was 2.3 cents, an improvement on (3.1)c in 2022, reflecting the higher adjusted EBIT and lower finance costs. Despite an improvement in the year, our adjusted tax rate remains high and this is covered in detail in the Financial Review on page 19.

Statutory results

Operating profit in the year was $38 million compared to an operating loss of $565 million in 2022, which was impacted by goodwill and intangible impairments of $542 million.

Operating profit included $77 million of exceptional items. These included $5 million of costs related to the unsolicited bids from Apollo Global Management, which were booked in the first half of the year, and the movement in our asbestos liability. Also included is a $45 million charge in relation to the Power and Industrials EPC business which we closed in 2022. The charge includes a receivable write down booked in the first half as well as a provision taken in the second half of the year relating to an arbitration claim against Wood. Further details are included in the Financial Review on pages 16-17.

The loss for the period was $105 million, mainly reflecting the low level of statutory operating profit offset by finance costs and tax. Our basic earnings per share was (16.1) cents (FY22: (52.4) cents).

Cash performance reflects our turnaround journey

As expected, we saw a significant improvement in our adjusted operating cash flow to $194 million. This year-on-year improvement of $260 million was driven by higher adjusted EBITDA and a much-improved working capital performance.

Our free cash outflow of $265 million includes $145 million of outflows related to exceptional cash items.

Looking ahead, we continue to expect to grow operating cash at a rate above the growth in EBITDA while also reducing the exceptional cash outflows. Operating cash generation will be further strengthened by the actions we are taking on cost and portfolio, and we expect to generate significant free cash flow from 2025.

Business momentum

We continue to see good momentum across our business. Our order book of $6.3 billion was up 7% on a like-for-like basis while we saw double-digit growth in our factored sales pipeline. Our headcount grew by 1% excluding the Gulf of Mexico business.

Encouragingly, we continue to see improvements in pricing. The price of work in both our pipeline and order book improved throughout 2023 and better pricing was a key driver of margin expansion in the year.

Delivering on our profitable growth strategy in 2023

We set out our profitable growth strategy in November 2022 and we are delivering on each of the three pillars: inspired culture, performance excellence, and profitable growth.

1) Delivering an inspired culture

An inspired culture is about creating a great place to work. During 2023 we put a real focus on culture and improving employee engagement. We were pleased to see a vastly improved employee net promoter score in our mid-year survey and a lower level of employee turnover in professional roles across the Group. Improving leadership diversity is a key part of our inspired culture pillar, with a target of 40% female representation amongst our senior leaders by 2030. We have now reached 35%, an improvement on 32% at December 2022.

2) Delivering performance excellence

Performance excellence is about being results-focused and delivering across all of the business. Our order book growth highlights the work done across all business units to win new work while maintaining the bidding discipline crucial to our strategy. Encouragingly, we have also delivered improvements in pricing across the business. We are pleased to have grown our sustainable solutions business again, now to around $1.3 billion of revenue, and representing 43% of our pipeline. Our Global Execution Centre is a critical part of delivering performance excellence for our clients and we now have over 2,000 employees working in our centre in India.

3) Delivering profitable growth

Delivering profitable growth is about building a higher-grade business. We grew adjusted EBITDA by 9% in the year despite higher pass-through activity and the opex investments we made for growth. This shows the pricing benefits starting to come through along with improved operational delivery. Delivering profitable growth will lead to significant cash flow generation over time. In 2023 we delivered a substantial improvement in our operating cash flow as we continued our cash recovery journey.

We have the right business model in place

We are now a services-led business with the majority of our contracts cost reimbursable (c.80% of revenue) and the remainder mostly fixed price services (c.20% of revenue). This contract mix represents our risk-appetite following our strategic move away from LSTK activity.

Our markets are attractive

The energy and materials markets offer significant growth opportunities for Wood. We are focused on:

· Large markets with solid growth - Oil & Gas and Chemicals

· Small markets today with substantial growth potential - Hydrogen and Carbon Capture

· Large markets where we can significantly grow our share - Minerals and Life Sciences

Together, these six focus markets offer an addressable market of c.$240 billion in 2026. We expect to outperform market growth through continued market leadership, winning share and a shift in our business mix over time.

Winning work across our markets

During 2023, we continued to win work across all of our markets, helped by client demands for solutions that address energy security, energy transition and sustainable materials.

Significant contract wins across Energy in the year included:

· New global framework agreement with Shell

· Detailed engineering design for Woodside's Trion project in the Gulf of Mexico

· New strategic partnership with Harbour Energy, with contracts worth around $330 million

· c.$250 million contract extension in Southeast Asia for operations and brownfield engineering services

Significant contract wins in the year in Materials included:

· Collaboration agreement with OMV for the licensing of its ReOil® plastic recycling technology

· $50 million capital project delivery partner contract from GSK in the USA

· FEED and EPCm for Europe's largest high purity manganese processing facility

Our pipeline continues to grow across both energy and materials, and shows the diversification of the future Group, with 34% of the pipeline in materials and 64% in energy.

Growing our Consulting business

Our higher-margin Consulting business saw the strongest growth across the business in 2023, following a reorganisation at the start of the year and increased opex investments to drive growth. Consulting operates across all of our end markets, addressing client challenges across energy, materials and industrial digitalisation and decarbonisation. In 2023, Consulting had sustainable solutions revenue of c.$225 million, helped by our solutions across hydrogen and carbon capture which together saw nearly 1,000 pieces of work awarded in 2023.

Growing our sustainable business

Wood is an enabler of net zero, providing solutions across decarbonisation, energy transition and materials for a net zero world. We generated around $1.3 billion of sustainable solutions revenue in 2023, up 15% on last year. Sustainable solutions now represent 22% of revenue and 43% of our factored sales pipeline.

In addition to the excellent progress we are making on growing our sustainable solutions business, we continue to deliver against our ESG strategy. We reduced our scope 1 & 2 carbon emissions by 71%, ahead of our 2030 target of a 40% reduction from our 2019 baseline, and we continued to progress leadership diversity. Our progress across ESG was once again reflected in our MSCI AA rating, awarded for the ninth consecutive year, and the maintenance of our top quartile ranking against peers.

Simplification to enhance our strategic delivery

To build on the progress made in the first year of our three-year strategy, we have launched a simplification programme to enhance our strategic delivery and support margin expansion.

Driving margin expansion

We will drive higher margins, both EBITDA and EBIT, through:

· Continued growth - continuing to deliver scale benefits as we grow

· Evolution of our business mix - continued shift to services-led model and higher growth in Consulting

· Improved pricing - reflecting the selectivity of work and the significant demand for our expertise

· Taking action on cost - simplification programme to create a leaner and more efficient Wood

Simplification programme

We have set out a simplification programme to help us deliver higher margins while remaining focused on business growth. This programme will:

· Right-size our central functions - by putting greater ownership and accountability for functional activities into the business units, and reducing the number of central function roles

· Simplify the way we work - by reducing complexity in our functional structure, processes and procedures, and expanding our shared services model

· Deliver IT savings - building on the cost savings announced previously

· Reduce property costs - cost savings announced previously that will reduce our property portfolio

This programme is expected to generate annualised savings of around $60 million from 2025, with a benefit in FY24 of around $10 million. The costs to achieve this programme are expected to be around $70 million with an exceptional item to be recognised in our first half results. The cash impact is expected to be around $50 million in FY24, weighted to the first half, and around $20 million in FY25.

Aligning our portfolio with our strategy

We continue to evaluate our portfolio and identified certain businesses deemed non-core to our strategic growth and priorities. The largest of which is EthosEnergy, a joint venture within Investment Services. We announced in January 2024 that we had started the sales process for EthosEnergy and have made good progress to date. We are also actively exploring options for a number of other small businesses in our portfolio.

Upgraded 2024 outlook

Adjusted EBITDA is expected to grow towards the top end of our mid to high single digit medium term target, before the impact of disposals. Our adjusted EBITDA margin is expected to expand in 2024, driven by topline growth, an evolving business mix and improved pricing, plus the c.$10 million in-year benefits of our simplification programme.

Performance in 2024 will be weighted to the second half, reflecting the typical seasonality of our business and the phasing of the in-year benefit of the simplification programme.

Our cash performance is expected to continue to improve with operating cash growing at a faster rate than adjusted EBITDA. This will help deliver positive free cash flow before exceptional cash flows. These exceptional cash flows are expected to be around $120 million and will be weighted to the first half. They now include c.$50 million related to the delivery of the simplification programme.

Net debt at December 2024 is expected to be lower than December 2023 after the expected proceeds from planned disposals.

Upgraded medium-term outlook

The simplification programme is expected to add to our growth potential, leading to adjusted EBITDA growth in 2025 above our medium-term target. We will continue to expand our adjusted EBITDA margin and that benefit will translate into our EBIT margins and support a significant increase in our earnings per share over the medium term.

We are on-track to deliver significant free cash flow in 2025, as previously guided. Our sustainable free cash flow generation from 2025, combined with proceeds from disposals, will provide increased flexibility in our capital allocation policy.

Executive Management Team changes

Marla Storm joined Wood in January 2024 as Chief Human Resources Officer (CHRO), replacing Lesley Birse who has retired. Michael Rasmuson joined Wood in January 2024 as Group General Counsel, replacing Martin McIntyre, who will remain as Company Secretary until a successor for this role is appointed. Arvind Balan will join as CFO in April 2024, replacing David Kemp who will retire. Marla and Michael are based in Texas, USA, and Arvind will be based in London, UK.

BUSINESS REVIEWS

CONSULTING

Our Consulting business provides technical consulting, digital consulting, and energy asset development. It also provides decarbonisation and digital solutions that open opportunities across our other business units.

Financial review

1. Re-presented to include the Built Environment Consulting Saudi Arabia business, see note on page 4.

2. Adjusted EBITDA includes $nil from JVs (FY22: $nil). Revenue does not include any contribution from JVs.

Revenue of $739 million was 13% higher than last year, with strong growth across both technical consulting and digital consulting in both our energy and materials markets.

Adjusted EBITDA of $80 million was 4% higher than last year and 6% higher on a constant currency basis, reflecting the revenue growth offset by a lower margin. The lower adjusted EBITDA margin of 10.8% partly reflects the exit of high-margin work in Russia in 2022, as well as the opex investments we made to secure future growth.

The order book at 31 December 2023 was $529 million, up 11% on last year.

Operational review

Consulting completed an internal restructure at the start of 2023 and made significant opex investments to better align with the growth trends across technical consulting, digital consulting and decarbonisation.

Across our markets, Consulting saw double-digit growth across both energy and materials and 47% growth in sustainable solutions, helped by demand for our renewables and decarbonisation consulting solutions.

Key awards in the period across Consulting included:

· Feasibility study in Europe looking at converting natural gas pipelines for hydrogen transportation

· Supporting Chevron Renewable Energy Group's Biorefinery

· Pre-FEED work on SGN's high pressure hydrogen pipelines

Sustainable solutions revenue was c.$225 million, up 47% and represented around 30% of Consulting revenue.

Outlook for 2024

Following the opex investments made in 2023, we expect Consulting to have the strongest EBITDA growth in the Group, supported by good revenue growth and an expansion in margin, weighted to the second half as performance and pricing benefits ramp up.

PROJECTS

Our Projects business mainly provides complex engineering design and project management across energy and materials markets including oil and gas, chemicals, metals and minerals and life sciences.

Financial review

1. Pass-through revenue, which generates only a small or nil margin, was around $460 million (FY22: c.$290 million).

2. Adjusted EBITDA includes $3.4 million from JVs (FY22: $3.9 million). Revenue does not include any contribution from JVs.

Revenue of $2,424 million was 10% higher than last year. The business saw strong growth across oil and gas and chemicals offsetting the run-down of our LSTK and large-scale EPC activities and lower revenue in minerals. Over half of the revenue growth came from the increase in pass-through revenue.

Adjusted EBITDA of $177 million was 5% higher than last year. This reflected the revenue increase combined with a lower margin of 7.3%. The lower margin includes the impact of higher pass-through revenue, for which we receive nil or a small margin, and increased opex investments made in the year.

The order book at 31 December 2023 was $2,026 million, down 3% on last year reflecting our shift away from LSTK and largescale EPC, and lower orders in our minerals business.

Operational review

The strategic move away from LSTK and largescale EPC is now complete and is reflected in the lower headcount. We continue to grow our services-led business model across energy and materials.

Business growth was balanced across both energy and materials market. Key awards in the period included:

· Collaboration agreement with OMV for the licensing of its ReOil® plastic recycling technology

· FEEDs for ADNOC's and QatarEnergy's gas facilities in the Middle East

· Detailed engineering design for Woodside's Trion project in the Gulf of Mexico

· Significant life sciences engineering contract in the USA with GSK worth c.$50 million

· Brownfield engineering contract to help produce active pharmaceutical ingredients in Europe

· Supporting one of the world's largest offshore clean power projects in Germany

Sustainable solutions revenue was c.$730 million, up 10% and represented c.30% of Projects revenue despite a reduction in loss-making LSTK activity in renewables.

Outlook for 2024

We expect moderate revenue and EBITDA growth, weighted to the second half given the phasing of new orders and our continued shift away from LSTK and largescale EPC work. Our adjusted EBITDA margin is expected to expand as the year progresses.

OPERATIONS

Our Operations business manages and optimises our customers' assets including decarbonisation, maintenance, modifications, brownfield engineering, and asset management through to decommissioning.

Financial review

1. Pass-through revenue, which generates only a small or nil margin, was around $550 million (FY22: c.$500 million)

2. Includes the results of the Gulf of Mexico labour operations business that was sold in March 2023. In FY23, this business contributed 

$21 million of revenue (FY22: $99 million) and $1 million of adjusted EBITDA (FY22: $5 million).

3. Adjusted EBITDA includes $13.0 million from JVs (FY22: $15.2 million). Revenue does not include any contribution from JVs.

Revenue of $2,482 million was 3% higher than last year, and 4% higher at constant currency. This reflects continued increases in activity levels in oil and gas across Europe, the Middle East and Asia-Pacific. Revenue growth also includes an increased level of pass-through revenue and the impact of the sale of the Gulf of Mexico labour operations business in the period.

Adjusted EBITDA of $165 million was 12% higher than last year, and 16% higher at constant currency, reflecting the revenue growth and an increased margin of 6.7%. This margin increase, despite higher pass-through revenue, mainly reflects improved overall contract performance and some improved pricing.

The order book at 31 December 2023 was $3,605 million, 9% higher than last year and reflects the expected strong final quarter for bookings. Excluding the Gulf of Mexico offshore labour operations business, the order book was up 15% at constant currency.

Operational review

Operations continued to benefit from higher activity levels across geographies. Key awards in 2023 included:

· New strategic partnership with Harbour Energy for its UK North Sea operations, with associated contracts for five years (with five one-year extensions) worth around $330 million

· c.$250 million contract extension in SE Asia for operations and brownfield engineering services

· Brownfield modifications for bp's Murlach development in the North Sea

· Brownfield EPCm contract with Woodside in Australia

· Two-year operations contract extension with Equinor in the Mariner field in the North Sea

Sustainable solutions revenue was c.$260 million, up 15% and representing around 11% of Operations revenue.

Outlook for 2024

We expect moderate revenue and EBITDA growth throughout the year.

INVESTMENT SERVICES

Our Investment Services business unit manages a number of legacy activities and includes our Turbines joint ventures. The most notable areas are activities in industrial power and heavy civil engineering.

Financial review

1. Includes results from our two Turbines joint ventures. Adjusted EBITDA from these JVs was $65 million in FY23 and $48 million in FY22. Revenue does not include any contribution from JVs.

Revenue of $255 million was 28% higher than last year. This growth primarily reflects strong activity growth in our heavy civils business and the transfer of a facilities business into Investment Services in 2023 from Projects.

Adjusted EBITDA of $77 million mostly represents the share of results from our Turbines joint ventures of 

$65 million, up significantly on last year with a strong performance across both EthosEnergy and RWG. Excluding these Turbine JVs, adjusted EBITDA was down significantly.

The order book at 31 December 2023 was $109 million, down 34% on last year.

Outlook for 2024

We expect the contribution from Investment Services to be broadly flat in 2024, with the performance of our Turbine JVs weighted to the second half as is typical in these businesses.

CENTRAL COSTS

Central costs, not allocated to business units, increased slightly to $76 million, with cost reductions mostly offsetting inflationary pressures.

Outlook for 2024

We expect to see a reduction in central costs of around $10 million from the benefits of our simplification programme.

FINANCIAL REVIEW

Trading performance

Trading performance is presented on the basis used by management to run the business with adjusted EBITDA and adjusted EBIT including the contribution from joint ventures. Revenue does not include any contribution from joint ventures. A reconciliation of adjusted EBITDA and adjusted EBIT to operating profit is included below. A calculation of adjusted diluted EPS is shown on page 19.

In the table above depreciation and amortisation include the contribution from joint ventures.

Built Environment Consulting (sold in September 2022) is classified as a discontinued operation and its results are included within "Total Group" measures. Continuing operations excludes its results. The comparative information has been re-presented due to the reclassification of Built Environment Consulting Saudi Arabia from discontinued into continuing operations. This relates to the sale of a subsidiary, previously classified as held for sale, which did not complete during 2023 and will now be retained by the Group. The revenue of this business for the year ended 31 December 2022 was $27.1 million and Adjusted EBITDA was $3.1 million. 

Revenue was up 8% on 2022 to $5,900.7 million with good growth across all business units. Adjusted EBITDA increased by $34.5 million to $422.7 million primarily due to the higher revenue and helped by a slightly higher margin of 7.2% as operational performance and improved pricing offset investments in operating costs.

Adjusted EBIT increased by $8.0 million with higher adjusted EBITDA partly offset by higher depreciation of right of use assets and a higher software amortisation charge reflecting the increased software spend across the Group in recent years.

Operating profit of $37.5 million (2022: loss $565.2 million) has improved mainly due to lower exceptional items of $76.7 million (2022: $121.2 million) and no impairment charge (2022: $542.3 million) being recognised on goodwill and intangible assets. The $22.5 million profit from discontinued operations, net of tax includes the final proceeds from the Built Environment Consulting business following agreement of the completion balance sheet between the Group and WSP. The increase in the tax charge to $65.0 million (2022: $10.9 million) is primarily driven by actuarial movements in the UK pension scheme.

The review of our trading performance is contained within the Chief Executive Review on pages 5 to 12.

Reconciliation of Adjusted EBIT to Adjusted diluted EPS

See notes on page 24

Reconciliation to GAAP measures

The reconciliation from adjusted EBIT of $185.0 million (2022: $177.0 million) to adjusted earnings of $5.6 million (2022: $38.8 million) has been provided to show a clear reconciliation to adjusted diluted EPS, which is a key performance measure of the Group. The reconciliation to GAAP measures highlights that the adjusted measures remove exceptional items, the exceptional items on discontinued operations and the associated tax charges on the basis that these are disclosed separately due to their size and nature to enable a full understanding of the Group's performance. Please refer to commentary on exceptional items and associated tax charges on pages 16 to 18. Amortisation on intangible assets from acquisitions and the associated tax credit has been excluded to allow a more useful comparison to Wood's peer group.

Amortisation, depreciation and other impairments for continuing operations

Total amortisation for 2023 was $161.1 million (2022: $153.4 million), all of which relates to the continuing Group. The total amortisation charge includes $54.5 million of amortisation of intangibles recognised on the acquisition of Amec Foster Wheeler ("AFW") (2022: $63.5 million). Amortisation in respect of software and development costs was $106.6 million (2022: $89.0 million) and this largely relates to engineering software and ERP system development. Included in the amortisation charge for the year is $1.4 million (2022: $1.5 million) in respect of joint ventures.

The total depreciation charge in 2023 amounted to $129.3 million (2022: $119.8 million) and includes depreciation on right of use assets of $103.1 million (2022: $90.5 million). Included in the depreciation charge for the year is $13.1 million (2022: $12.3 million) in respect of joint ventures.

Net finance expense and debt

Interest on bank borrowings of $59.4 million (2022: $47.2 million) primarily relates to interest charged on borrowings under the $1.2 billion Revolving Credit Facility ('RCF') which matures in October 2026 and the United Kingdom Export Facility ('UKEF') term loan which was repaid in December 2023 and replaced with a $200.0 million term loan facility maturing in October 2026. Despite the reduction in average net debt during the period, there was a $12.2 million increase in interest on bank borrowings. The increase in the interest expense is primarily driven by higher interest rates in 2023 compared with 2022. The higher interest rate is primarily driven by higher base rates throughout 2023 partially offset by the impact of a lower margin in 2023, caused by the reduction in the net debt to adjusted EBITDA covenant from December 2022.

The interest charge on US Private Placement debt decreased by $23.7 million to $16.6 million primarily due to the total repayment of around $450 million to the USPP noteholders during the second half of 2022, being the early settlement of notes following the disposal of the Built Environment Consulting business. The Group had $352.5 million (2022: $352.0 million) of unsecured loan notes outstanding at 31 December 2023, maturing between 2024 and 2031 with around 75% due in 2025 or later.

Other interest, fees and charges amount to $12.6 million (2022: $22.4 million) and principally relates to the interest on other facilities of $8.4 million, including the receivables factoring facilities and amortisation of bank facility costs of $4.2 million (2022: $10.5 million). The reduction of $9.8 million in other interest, fees and charges is primarily due to lower bank facility costs due to one off, non-cash charges incurred in 2022 as a result of the partial early repayments of the UKEF and USPP facilities.

In total, the Group had undrawn facilities of $902.1 million as at 31 December 2023, of which $843.1 million related to the revolving credit facility.

The Group recognised interest costs in relation to lease liabilities of $18.7 million (2022: $16.4 million) which relates to the unwinding of discount on the lease liability.

Included within the discounting balance of $12.3 million (2022: $6.8 million) is the unwinding of discount on the asbestos provision of $11.1 million (2022: $5.9 million).

Net debt excluding leases to adjusted EBITDA (excluding the impact of IFRS 16) at 31 December was 2.08 times on a covenant basis (2022: 1.3 times) against our covenants of 3.5 times. This is calculated pre IFRS 16 as our covenants are calculated on a frozen GAAP basis, see note 4 on page 24.

Interest cover (see note 5 on page 25) was 4.0 times on a covenant basis (2022: 4.2 times) against our covenant of 3.5 times. 

Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance. 

Power and Industrial EPC losses

The Group made a strategic decision in 2021 to exit certain business segments within the Power and Industrials sub business group. Following that decision, we ceased to operate in the large-scale EPC or lump sum turnkey business segment.

The costs of exiting that business and any subsequent costs related to the wind down of contracts in that business, to the extent they are material in size, have been treated as exceptional on the basis that they relate to a segment in which the Group no longer operates. 

In the first half of 2023 the Group recorded a non-cash exceptional charge of $20.4 million relating to a write down of receivable balances arising from activity in the Power and Industrial EPC business. The Group had expected to recover these balances, but these have since been disputed. 

In the second half of 2023, a former client raised an arbitration claim against the Group in respect of alleged damages and costs arising from a legacy Power and Industrial contract. Following evaluation of the claim, the Group has recognised a provision of $23.0 million with a charge to exceptional items, representing our assessment of probable outflows arising from the matter. 

During the year additional costs relating to the discontinued business of $1.7 million were recorded as an exceptional charge. This follows previous write downs made during 2022 of $25.0 million, including a revenue reversal of $8.0 million which represents the impact of a reduction in total value of the contract and is in relation to revenue recognised in prior years.

Apollo related costs

The Group incurred $4.8 million in relation to legal and advisor costs arising from Apollo's preliminary approach to potentially acquire the ordinary share capital of the Group, which did not ultimately lead to an offer.

Investigation support costs and provisions

The regulatory investigations were all closed out during 2021 and the agreed settlements were materially in line with the provision made in 2020. The $2.6m credit relates to the release of provisions made for additional legal and other costs which were ultimately not needed. 

Asbestos

All asbestos costs have been treated as exceptional on the basis that movements in the provision are non-trading and can be large and driven by market conditions which are out with the Group's control. Excluding these charges from the trading results improves the understandability of the underlying trading performance of the Group. 

The charge before interest and tax of $29.4 million (2022: $21.5 million) in 2023 comprises a $34.2 million charge (2022: $52.8 million) based on an updated actuarial review reflecting the best estimate for recent claims experience and $5.4 million (2022: $4.3 million) of costs in relation to managing the claims. These are offset by a credit of $10.0m which relates to the collection of insurance proceeds from an insolvent insurer and a yield curve credit of $0.2 million (2022: $35.6 million). The lower yield curve credit recognised in 2023 is principally due to the 27 year blended curve rate of 3.64% not being materially different to the 30 year flat rate of 3.97% in 2022.

Interest costs of $11.1 million which relate to the unwinding of discount on the asbestos provision over time are shown as exceptional (2022: $5.9 million).

Redundancy, restructuring and integration costs

No costs were incurred in 2023. In the prior year, $30.1m was incurred in relation to redundancy and restructuring activities. 

Enterprise settlement

In the prior year, the Enterprise claim was concluded, with the amount settled being in excess of the amount provided for. The charge in the prior year was classed as an exceptional both by its nature (historic litigation settlement) and by size.

Tax

An exceptional tax charge of $10.4 million (2022: $36.4 million credit) has been recorded during the period. It consists of a $0.2 million tax credit on exceptional items (2022: $5.2 million charge), a $7.4 million credit in relation to the release of an uncertain tax provision created through exceptional items on the disposal of the Well Support business in 2011, offset by an exceptional charge of $18.0 million (2022: $41.6 million credit) recognised due to the actuarial loss in relation to the UK defined benefit pension scheme. As deferred tax liabilities support the recognition of deferred tax assets, the reduction of $18.0 million of deferred tax assets has been charged through exceptional items based on its size.

Taxation

The effective tax rate on profit before tax, exceptional items and amortisation and including Wood's share of joint venture profit on a proportionally consolidated basis is set out below, together with a reconciliation to the tax charge in the income statement.

The effective tax rate reflects the rate of tax applicable in the jurisdictions in which the Group operates and is adjusted for permanent differences between accounting and taxable profit and the recognition of deferred tax assets. Key adjustments impacting on the rate in 2023 are withholding taxes suffered on which full double tax relief is not available, deferred tax not recognised primarily in relation to interest expenses not deductible in the current year, less the release of uncertain tax provisions reflecting the positive outcomes in relation to specific risks.

In addition to the effective tax rate, the total tax charge in the income statement reflects the impact of exceptional items and amortisation which by their nature tend to be expenses that are more likely to be not deductible than those incurred in ongoing trading profits. The income statement tax charge excludes tax in relation to joint ventures. The increase in the tax charge in 2023 is largely a result of the exceptional tax charge of $18.0 million (2022: $41.6 million credit) on deferred tax assets as a result of actuarial movements on the UK pension scheme.

Adjusted tax charge

As noted on page 14 our adjusted tax charge was $58.3 million (2022: $59.2 million), representing an adjusted effective tax rate of 73%. This was lower than the adjusted rate of 140% in 2022, principally due to the significant reduction in net finance costs in the year. Our adjusted tax rate remained relatively high however, representing a range of factors including the geographical mix of profits and losses across the Group, restrictions on the deductibility of interest, withholding taxes on income in certain jurisdictions and limits on the recognition of deferred tax assets in the UK and US due to losses in these countries.

Earnings per share

The calculation of basic earnings per share is based on the earnings attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the year excluding shares held by the Group's employee share trusts. For the calculation of adjusted diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary shares, only when there is a profit per share. Adjusted diluted earnings per share is disclosed to show the results excluding the impact of exceptional items and amortisation related to acquisitions, net of tax.

For the year ended 31 December 2023, the Group reported a basic loss (2022: loss) per ordinary share, therefore the effect of dilutive ordinary shares are excluded (2022: excluded) in the calculation of diluted earnings per share. Where profits have been made when disaggregating discontinued and continuing operations, the calculation of diluted earnings per share was performed on the same basis as the whole Group.

Basic loss per share for the year was 16.1 cents (2022: 52.4 cents). The reduction in loss per share is driven by lower exceptional items, net of tax in the continuing Group. The adjusted earnings per share was 0.8 cents (2022: 5.7 cents). The decline in the year mainly reflects the absence of Built Environment Consulting. This measure excludes exceptional items, amortisation of acquired intangibles and all related tax charges and credits. A reconciliation of adjusted EBIT to adjusted EPS is shown on page 14.

Capital allocation

We look to manage our target leverage over the medium term within a range of around 0.5 to 1.5 times net debt (excluding leases) to adjusted EBITDA (pre-IFRS 16). Beyond this, we consider how best to create value for our shareholders from dividends, share buybacks or attractive acquisitions.

Cash flow and net debt

The cash flow for the year is set out below and includes both continuing and discontinued operations:

Closing net debt at 31 December 2023 including leases was $1,094.3 million (2022: $736.1 million). Included within closing net debt is the IFRS 16 lease liability which is the net present value of the lease payments that are not paid at the commencement date of the lease and subsequently increased by the interest cost and reduced by the lease payment made. The lease liability as at 31 December 2023 was $400.8 million (2022: $342.9 million), with the increase primarily relating to a new office campus in Reading, UK that replaced a previous location. All covenants on the debt facilities are measured on a pre-IFRS 16 basis.

Closing net debt excluding leases as at 31 December 2023 was $693.5 million (2022: $393.2 million). The monthly average net debt excluding leases in 2023 was $846.4 million (2022: $1,489.1 million). The cash balance and undrawn portion of the Group's committed banking facilities can fluctuate throughout the year. Around the covenant remeasurement dates of 30 June and 31 December the Group's net debt excluding leases is typically lower than the monthly averages due mainly to a strong focus on collection of receipts from customers.

Cash generated from operations pre-working capital reduced by $64.6 million to $349.4 million from $414.0 million in the year to December 2023 reflecting increased EBITDA from continuing operations more than offset by EBITDA from the business sold in 2022. It includes a decrease in provisions of $22.1 million which is mainly explained by utilisations of the provision in the year. New provisions created through EBITDA were largely offset by releases to EBITDA. The releases in 2023 are driven by the Group concluding on a number of historic project related and insurance provisions which are no longer considered necessary following resolution of the disputes or the underlying risk. New provisions primarily relate to insurance and various individually immaterial project provisions. The other movement of $17.0 million (2022: $28.1 million) is principally comprised of non-cash movements through EBITDA including share-based charges of $19.6 million (2022: $20.7 million), FX movements of $3.1 million (2022: $8.1 million) and non-cash gains on disposal of the Gulf of Mexico assets, right of use assets and property, plant and equipment of $2.0 million, $1.7 million and $2.6 million respectively.

There was a working capital outflow of $53.5 million (2022: $366.7 million). The outflow in receivables of $67.7 million was driven by an increase to revenue in 2023 and higher closing days sales outstanding ("DSO") leading to higher trade receivables and gross amounts due from customers. The trade and other payables balance is broadly consistent with 2022, resulting in a working capital inflow in the year due to payables of $12.7 million.

The Group has receivables financing facilities totalling $200.0 million. The amount utilised at 31 December 2023 was $198.2 million (2022: $200.0 million). The facilities are non-recourse to the Group and are not included in our net debt. 

Cash exceptionals including lease movements reduced by $170.3 million to $133.9 million as the Group continues to reduce its exposure to legacy contracts. Payments made during 2023 mainly relate to the settlement of known legal claims and asbestos payments. These include the historic SFO investigation payments of $38 million which were provided for in 2020 and net asbestos payments of around $40 million. The remaining cash exceptionals mainly relates to the legacy Aegis contract of $27 million and other legacy contracts of $12 million.

The other reduction in net debt of $1.4 million (2022: increase of $20.5 million) is principally comprised of the movements in accrued bank interest and prepaid debt facility costs which are included within net debt.

The free cash outflow of $312.8 million (2022: $624.3 million) was lower than in 2022, largely due to the $170.3 million improvement in cash exceptionals and improved working capital performance of $313.2 million. This was offset mainly by an increase in the non-cash movement in leases totalling $160.9 million (2022: $41.7 million) driven by significant lease renewals in the year, an increase of $17.2 million related to the purchase of intangible assets, including software and investment in ERP improvements throughout the Group and an increase in tax paid of $15.8 million following conclusion of a number of uncertain tax provisions.

A net cash outflow from divestments of $22.5 million includes final proceeds from the disposal of the Built Environment Consulting ($27.1 million) and proceeds from the sale of the Gulf of Mexico business ($17.5 million). These are offset by taxes paid on the Built Environment Consulting disposal of $65.0 million and professional costs incurred on the disposal of Built Environment Consulting of $2.1 million.

Operating cash conversion, before capital expenditure, calculated as cash generated from operations as a percentage of adjusted EBITDA (less JV EBITDA) increased to 87.3% (2022: 11.8%) primarily due improved working capital performance.

Summary balance sheet

At 31 December 2023, the Group had net current liabilities of $207.0 million (2022: $235.0 million).

Goodwill and intangible assets amount to $4,319.0 million (2022: $4,309.1 million) and principally comprises of goodwill and intangibles relating to acquisitions. The increase of $9.9 million comprises of software additions of $131.0 million and FX movements of $53.6 million offset by amortisation charges of $159.7 million and $15.0 million of goodwill disposed following sale of Gulf of Mexico assets.

Right of use assets and lease liabilities amount to $355.9 million (2022: $276.0 million) and $400.8 million (2022: $342.9 million) respectively. The increase in both the right of use asset and lease liability primarily relates to a new office campus in Reading, UK contributing to around $68 million and $64 million respectively.

Trade and other receivables increased to $1,554.4 million reflecting the increased revenues compared with 2022 and a higher DSO. Trade and other payables increased to $1,706.7 million also reflecting the increasing activity levels and follows the normalisation of the balance as at December 2022.

Largely as a result of the acquisition of AFW, the Group is subject to claims by individuals who allege that they have suffered personal injury from exposure to asbestos primarily in connection with equipment allegedly manufactured by certain subsidiaries during the 1970s or earlier. The overwhelming majority of claims that have been made and are expected to be made are in the USA. The asbestos related litigation provision amounts to $306.5 million (2022: $311.4 million).

The net asbestos liability at 31 December 2023 amounted to $328.1 million (2022: $335.4 million) and comprised $306.5 million in provisions (2022: $311.4 million) and $50.4 million in trade and other payables (2022: $59.5 million) less $23.2 million in long term receivables (2022: $24.4 million) and $5.6 million in trade and other receivables (2022: $11.1 million).

The Group expects to have net cash outflows of approximately $35 million as a result of asbestos liability indemnity and defence payments in excess of insurance proceeds during 2024. The Group has worked with its independent asbestos valuation experts to estimate the amount of asbestos related indemnity and defence costs at each year end based on a forecast to 2050.

Other provisions as at December 2023 were $135.3 million (2022: $148.3 million) and comprise project related provisions of $42.2 million (2022: $63.3 million), insurance provisions of $40.7 million (2022: $46.2 million), property provisions of $27.4 million (2022: $26.0 million) and litigation related provisions of $25.0 million (2022: $12.8 million).

Full details of provisions are provided in notes 21 and 22 to the condensed financial statements.

Pensions

The Group operates a number of defined benefit pension schemes in the UK and US, alongside a number of defined contribution plans. At 31 December 2023, the UK defined benefit pension plan had a surplus of $391.9 million (2022: $432.4 million) and other schemes had deficits totalling $80.1 million (2022: $73.2 million).

The Group's largest pension scheme, the UK Pension Plan, has total scheme assets of $2,822.5 million (2022: $2,690.1 million) and pension scheme obligations of $2,430.6 million (2022: $2,257.7 million) and is therefore 116% (2022: 119%) funded on an IAS 19 basis. There was an increase in scheme liabilities arising from a lower discount rate used in the actuarial assumptions, which is partially offset by an increase in scheme assets. 

In assessing the potential liabilities, judgement is required to determine the assumptions for inflation, discount rate and member longevity. The assumptions at 31 December 2023 showed a small reduction in the discount rate which results in higher scheme liabilities resulting in an overall decrease to the surplus compared to December 2022. Full details of pension assets and liabilities are provided in note 33 to the condensed financial statements.

The UK defined benefit pension plan was estimated to have a surplus on a Technical Provisions basis at the last triennial valuation date which was 31 March 2023 subject to finalisation of the valuation during 2024. The Group is currently working closely with the Trustee to agree on a preferred direction regarding the future of the plan. Options being assessed include moving to a buy-in insured basis and eventual buy-out with a third party as soon as is reasonably practical, or to continue to run the WPP for a limited number of years to potentially generate further surplus. Any surplus could benefit both the Group and pension members, ensuring that appropriate safeguards for both the funding position and members' interests are taken into account at all times.

Contingent liabilities

Details of the Group's contingent liabilities are set out in note 34 to the condensed financial statements.

Divestments

The final proceeds from the disposal of the Built Environmental Consulting business were agreed during 2023 upon agreement of the completion balance sheet between the Group and WSP. This has resulted in an additional gain of $31.0 million, comprising largely of $27.1 million of cash proceeds and the release of completion accruals being recognised in discontinued operations.

Notes

1. A reconciliation of operating profit/(loss) to adjusted EBITDA is presented in table below and is a key unit of measurement used by the Group in the management of its business.

2. Adjusted diluted earnings per share (AEPS) is calculated by dividing earnings attributable to owners before exceptional items and amortisation relating to acquisitions, net of tax, by the weighted average number of ordinary shares in issue during the period, excluding shares held by the Group's employee share ownership trusts and is adjusted to assume conversion of all potentially dilutive ordinary shares. AEPS on continuing operations excludes the adjusted loss from discontinued operations, net of tax of $10.2 million (2022: profit of $60.2 million). In 2023, AEPS was not adjusted to assume conversion of all potentially dilutive ordinary shares because the unadjusted result is a loss.

3. Number of people includes both employees and contractors at 31 December 2023.

4. Net debt to adjusted EBITDA cover on a covenant basis is presented in the table below:

Adjusted EBITDA (covenant basis) is on a rolling 12 month period and excludes adjusted EBITDA from the discontinued operation and the impact of applying IFRS 16. The funding agreements require that covenants are calculated by applying IAS 17 rather than IFRS 16. The covenant adjustment to net debt relates to finance leases which would be on the balance sheet if applying IAS 17. Note: the covenant basis shown above refers to the measure as calculated for our RCF. The measure used for our USPP senior loan notes is not materially different from the covenant measure shown above.

5. Interest cover on a covenant basis is presented in the table below:

The difference between adjusted EBITDA (covenant basis) and adjusted EBITA (covenant basis) is $26.2 million (2022: $29.2 million) and is mainly explained by 12-month rolling pre-IFRS 16 depreciation charges of $26.2 million (2022: $29.3 million).

6. Reconciliation to GAAP measures between consolidated cash flow statement and cash flow and net debt reconciliation

Decreases in provisions, receivables and payables, cash generated from operations and tax paid have been adjusted to show exceptional items separately to present significant items separately from the rest of the cash flow either by virtue of size or nature and reflects how the Group evaluates cash performance of the business.

Prior year cash exceptionals is defined as cash payments made in the current period in respect of amounts provided for in prior periods.

The proceeds on disposal of business represents the sale of a joint venture contained within Investment Services. Management consider this as part of Investment Services trading activity and therefore is included within adjusted cash generated from operations. 

Consolidated income statement

for the year to 31 December 2023

* The comparative information has been re-presented in line with the requirements of IFRS 5, paragraph 36, due to the reclassification of Built Environment Consulting Saudi Arabia from discontinued into continuing operations following a decision not to dispose of that business (note 7).

Consolidated statement of comprehensive income/expense

for the year to 31 December 2023

Exchange movements on the retranslation of foreign operations could be subsequently reclassified to profit or loss in the event of the disposal of a business.

* Based on the requirements of IAS 1 Presentation of Financial Statements, the net exchange movements on disposal of foreign currency operations of $54.5m should have been deducted from the statement of comprehensive income and expense for the year ending 31 December 2022, and the prior year comparative has been adjusted to reflect this. This matter came to the attention of the directors following the Financial Reporting Council's Corporate Reporting Review Team ("FRC") enquiry. The reclassification adjustment had no impact on loss for the year, cash flows or any of the balance sheet captions in the current or prior period.

Consolidated balance sheet

as at 31 December 2023