John Wood Group has announced a trading update for the quarter ended 31 March 2024.
Ken Gilmartin, CEO, said:
'We are now in the second year of our growth strategy and are making good progress, with EBITDA growth, margin expansion and an order book 9% higher than a year ago. We continue to win exciting and complex work across energy and materials, with sustainable solutions representing 40% of our pipeline.
'We are progressing with our Simplification programme and have made some significant appointments this year including welcoming Arvind Balan as our new CFO. I am proud of the strong leadership team we have in place and confident that we will deliver on our significant potential. We are today reiterating our EBITDA guidance for 2024 and our outlook for 2025 '
Group performance
Q1 adjusted EBITDA was up 4% with margin expansion across all of our business units offsetting lower revenue. This margin performance was helped by both improved pricing and our strategic focus on building a higher quality business, with our move away from EPC work.
Q1 revenue was $1,356 million, down 6%(1) compared to $1,463 million in Q1 2023, with growth in Operations offset by lower revenue in Projects, mainly reflecting lower pass-through activity and lower EPC revenue in line with our strategic shift.
Our order book at 31 March 2024 was $6.2 billion, up 9% compared to March 2023.
Consulting
Consulting saw a higher margin in the first quarter despite revenue 2%(2) lower at $170 million, with strong growth in digital consulting offset by the phasing of work in technical consulting and our energy asset development business.
Consulting’s order book saw double-digit growth compared to a year ago which will support stronger revenue growth as the year progresses. Key wins in the quarter include being selected by Woodside Partners as the consultant for the Greater Sunrise development in Asia-Pacific, a blue-hydrogen ready unit in Europe and several digital consultancy scopes for BP and National Gas.
Projects
Q1 revenue was down 15%(2) to $518 million, mainly reflecting lower pass-through revenue and the roll-off of EPC work. Excluding these, revenue was down 1.5% with good growth in oil and gas offset by weakness in the minerals market. The margin was higher than last year, reflecting the revenue mix.
Project’s order book was lower than a year ago and is expected to recover in the second half of the year, with a healthy pipeline of opportunities due for award in the coming months. Key business wins in the period included a detailed engineering design scope for Woodside’s Trion project in the Gulf of Mexico and an EPCm contract with Antofagasta for its Nueva Centinela copper project in Chile.
Operations
Q1 revenue was up 5%(1) to $624 million, with higher activity levels across Europe and the Middle East. The margin was also higher, with strong business performance and our shift towards higher value services.
Operations’ order book saw double-digit growth compared to a year ago, with both strong demand for our services and significant renewals secured towards the end of last year. Key business wins in the period included a decarbonisation contract with TotalEnergies for flare gas recovery in the UK North Sea and a contract to deliver maintenance and modifications for Equinor in Brazil.
Investment Services
Q1 revenue was down 32%(2) to $44 million, mainly reflecting the expected run-down of activity in our facilities business as we exit this business.
Simplification programme progressing well
In March 2024, we launched our Simplification programme to drive higher margins over and above our pre-existing strategic plans. This programme consists of:
- Phase one: reducing central costs by putting greater ownership and accountability for functional activities into the business units, and reducing the number of central function roles
- Phase two: reducing complexity in our processes and procedures, and reducing external support costs
This programme is expected to generate total annualised savings of around $60 million from 2025, with around $10 million of savings in 2024. We have made good progress so far this year and have completed phase one, with a reduction in the number of central function roles. This phase will generate around
$25 million of annualised savings.
Full year outlook
We continue to expect high single digit growth in adjusted EBITDA, before the impact of disposals. 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.
Our operating cash flow performance is expected to continue to improve, partly through improved cash management across our business, especially given the second half weighted revenue profile of the Group this year. Exceptional cash flows will be in line with our previous guidance, and weighted to the first half.
Net debt at 31 December 2024 is expected to be at a similar level to 31 December 2023 after the proceeds from planned disposals, which are due to complete in the second half of this year.
2025 outlook
We continue to expect EBITDA growth in 2025 to exceed our medium-term target, with the annualised benefits from our Simplification programme of around $60 million on top of growth consistent with our strategy. With this improving profitability and continued improvements in cash conversion, we expect to deliver significant free cash flow in 2025.
- Excluding the Gulf of Mexico labour operations sold in March 2023. It contributed $21 million of revenue in Q1 2023.
- Like-for-like growth adjusted for businesses moved within business units in the period: part of our Life Sciences business was transferred from Consulting to Projects, and our Power business in the UK was transferred from Projects to Investment Services.
Source: Wood Group
