- First half revenue and profit down
- Order book rises by 4.7%
- Second-half recovery expected
Investors focused on a sluggish first six months of 2022 for Wood Group (WG.) despite the energy services flagging a recovery in the remainder of the year underpinned by a strong order book.
A measure of caution is probably understandable given how many times companies bank on a better second half to help them meet expectations and then fail to deliver.
The shares were marked down 4.3% to 143.5p after two hours of trading, which represented a partial recovery from lows seen earlier in the morning.
In the first half to 30 June, revenue was down 0.4% to $2.6 billion and operating profit before exceptional items fell 8.9% to $41 million.
The consulting division benefited from increased demand for energy solutions with revenue up 2% and the operations arm was up 18%, but there was still a lack of spending on new projects which meant a 15% decline in revenue for this part of the business.
PROJECTS DIVISION STRUGGLES
While the order book rose 4.7% to a healthy $6.42 billion, Wood has been moving away from taking on very large-scale projects.
The company reiterated full-year guidance for revenue of between $5.2 billion and $5.5 billion and adjusted earnings of $370 million to $400 million.
Recently-appointed chief executive Ken Gilmartin, who took over in July, said: ‘We are developing an updated strategy for Wood that will draw on our core strengths, return us to growth and deliver sustainable free cash flow.’
AJ Bell investment director Russ Mould commented: ‘In theory Wood Group, with its energy services focus, should be a beneficiary of buoyant prices, but that doesn’t appear to be the case with revenue and profit dipping in its first-half period.
‘The company’s pivot away from large projects is partly to blame and investment in the energy sector is yet to really pick up despite the significant cash windfall many companies have been enjoying.
‘Often there is a lag between a recovery in the oil and gas market and any increase in industry spend. The danger for Wood is that a weaker economic outlook puts businesses off sanctioning major developments.’
DISCLAIMER: AJ Bell referenced in this article is the owner and publisher of Shares magazine. The author (Tom Sieber) and editor (Ian Conway) own shares in AJ Bell.
