Wood Group has announced a trading update for the year ended 31 December 2024, an update on the independent review, an updated outlook, and an update on refinancing.
The outline results presented here are draft and subject to the conclusion of the independent review and full year audit, including the treatment of any prior year adjustments. This trading update is not a preliminary statement of annual results and has not, therefore, been reviewed by the Company’s auditors. An update on the timing of our full year results will follow in due course.
Trading headlines
- Delivery of 2024 guidance supported by actions taken in Q4
- FY24 adjusted EBITDA1 of around $450 million to $460 million
- FY24 adjusted EBIT2 of c.$205 million to c.$215 million
- Actions taken to mitigate weaker-than-expected trading in Q4, including cancelling executive and employee bonuses and actively managing working capital at year end
- Completed sale of EthosEnergy for net cash proceeds of $138 million
- Net debt excluding leases at 31 December 2024 of around $690 million3 (31 December 2023: $694 million) and average net debt in 2024 of c.$1.1 billion
- Order book increased to c.$6.2 billion at 31 December 2024, significantly improved on c.$5.4 billion at 30 September 2024
- Large wins in Projects and Operations including bp, OMV Petrom and Esso Australia
- Improved order book underpins outlook for the business and long-term growth potential
Independent review (‘Review’)
- The Review is continuing and Deloitte’s work and assessment will need to be complete before any conclusions can be reached. However, significant work has been undertaken and based on that:
- The Company does not expect that the findings of the Review will have a material impact on the Group’s cash position or its ability to generate cash in the future
- Following provisional indications from the Review, the Company is evaluating the extent of prior year adjustments which the Company expects will be required in relation to the Projects business unit and their impact on previously reported adjusted EBITDA for FY23 and any prior periods
- The Company is initiating steps to strengthen significantly the Group’s financial culture, governance and controls in light of material identified weaknesses and failures
Continuing the transformation of Wood
- De-risked the future business away from lump sum turnkey (‘LSTK’)
- No such work in our revenue, order book or pipeline today
- This de-risking has reduced revenue and left legacy claims liabilities to address
- Further cost saving actions to right size Wood for the future
- Simplification programme launched in March 2024 on track to deliver annualised savings of c.$60 million in FY25 (with cash costs to complete of c.$15 million in FY25)
- Programme now extended to target a further c.$85 million of annualised savings from FY26 onwards, with c.$60 million benefit in FY25 (with exceptional cash costs to complete of c.$30 million in 2025)
- In aggregate, these actions will reduce our cost base by c.$145 million from 2023 to 2026
- Following these actions, the business will be on a firmer operational footing, but cash generation has yet to materialise and financial strength needs significant improvement
Updated 2025 outlook
- Continue to expect good growth in 2025 supported by cost actions
- We expect double-digit adjusted EBITDA and adjusted EBIT growth (excluding the impact of disposals)4 in 2025
- This remains in line with market expectations, though our pathway to this now includes taking additional cost reduction measures as outlined above
- Now expect negative free cash flow of $(150) million to $(200) million in 2025, including:
- (i) The impact of weaker trading
- Lower expected underlying EBITDA growth in 2025, with incremental cost reduction actions to underpin growth (exceptional cash costs of c.$30 million)
- One-off working capital unwind in 2025 as a result of actively managing working capital at the 2024 year end (c.$70 million)
- (ii) Impacts related to the Review
- Deferral of expectation to realise cash inflow from pension surplus (c.$50 million)
- Professional costs relating to the Review and implementing enhancements (estimated to be c.$10 million)
- (iii) Legacy claims liabilities
- Quantum and timing of potential cash payments (c.$50 million)
- (i) The impact of weaker trading
- Targeting proceeds from disposals in 2025 of $150 million to $200 million to offset the negative free cash outflow in 2025 and maintain debt levels at 2024 levels
- Average net debt in 2025 expected to be in line with 2024 levels of around $1.1 billion (before disposals)
- Estimated total cash costs of legacy claims liabilities remain around $150 million5, which we expect to pay and extinguish over the next three years
- We had previously expected to broadly offset these payments with cash inflows associated with our pension surplus over the next three years. However, the current uncertainty around the Review has deferred our expectation of realising cash from this pension surplus
Actions in 2025 will underpin positive free cash flow in 2026
- Positive free cash flow expected in 2026 (before disposals) reflecting:
- Continued improvements in operating cash flow6, which has improved from $(66) million in FY22 to c.$275 million in FY24, helped by working capital improvements, including the absence of the 2025 working capital unwind (c.$70 million)
- Growth in adjusted EBITDA and adjusted EBIT from underlying business growth
- Incremental benefit of cost savings in FY26 (c.$25 million)
- Reduction in cash exceptionals from c.$100 million in FY25 (consisting of asbestos, restructuring costs and advisor fees) to c.$40 million in FY26 (only asbestos)
- Note that legacy claims cash payments are expected to be broadly similar in FY25 and FY26 and will be reported separately to exceptional cash costs
Refinancing
- As previously disclosed, the majority of the Group’s debt facilities mature in October 2026
- We are therefore undertaking a detailed, holistic assessment of all potential refinancing options
- As part of this, we are engaging with the Group’s lenders on these options together with any potential implications of prior year adjustments which may arise from the independent review
Ken Gilmartin, CEO, said:
'This is a difficult announcement amid our transformation. While we have made progress, I am disappointed in our financial performance. Consequently, we are taking decisive actions to ensure we can meet the opportunities we have in growing markets, principally energy.
'While the likely findings from the independent review are expected to have no material impact on the Group’s cash position and future cash generation, it clearly gives us areas to focus on and we are initiating steps now to further improve our financial culture, governance and controls.
'We have announced further actions to address the cost base of the business to right size Wood for the future, and have laid out a very clear route to positive free cash flow in 2026.
'As we look ahead, notwithstanding the challenges today, I am confident the fundamentals of this company remain strong – we are in growing markets, with considerable in-demand engineering skills, trusted client relationships, and we’re well positioned to grow the business'.
Source: Wood
