Wood Group misses estimates for 2023 but upgrades guidance

(Sharecast News) - Shares in Wood Group slumped on Tuesday despite an upgrade to its current-year outlook, as the engineering company reported wider-than-expected losses and increased debt levels for 2023.

The company, which works in consulting and engineering across the energy and materials markets, said margin growth, improved pricing, plus $10m in benefits from its cost-cutting 'simplification' programme means that adjusted EBITDA growth will be at the "top end" of the mid-to-high single-digit target for 2024.

Furthermore, the simplification programme, which is targeting annualised savings of $60m from 2025, is expected to drive EBITDA growth in 2025 above the company's medium-term target.

"Ultimately, our priority remains sustainable cash generation and we expect to deliver significant free cash flow from 2025," said chief executive Ken Gilmartin.

Nevertheless, 2023 results from Wood Group largely disappointed the market, with revenues rising 7.9% to $5.90bn, short of the $6bn guidance. The statutory net loss for the year was $105m, better than the $352m lost in 2022 but more than double what analysts were expecting (consensus estimate was $48m).

Net debt also rose to $694m, from $393m a year earlier, due to free cash outflow and $65m paid in taxes on the 2022 sale of the Built Environment Consulting division. The company had guided to net debt of $680m.

On an adjusted basis however, EBITDA improved by 8.8% to $423m, in line with market estimates.

Gilmartin said the company made "significant progress" in the first year of its three-year growth strategy, with revenue growth seen across all business units, as it ended the year with an order book of $6.3bn, up 4% on 2022.

By 1028 GMT, the stock was down 6.3% at 138.83p - its lowest level this year.