REG - Wood Group (John)PLC - Half year results - six months ended 30 June 2024
20/08/2024 07:00
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RNS Number : 0105B Wood Group (John) PLC 20 August 2024
Half year results for the six months ended 30 June 2024
20 August 2024
Delivering a higher quality business and reconfirming outlook
HY24 HY23 Movement
$m $m %
HEADLINE RESULTS
Order book(1) 6,209 5,991 3.6%
Revenue 2,844 2,986 (4.8)%
Adjusted EBITDA(2) 219 202 8.5%
Adjusted EBITDA margin 7.7% 6.8% 0.9ppts
Adjusted EBIT(3) 102 89 14.2%
Adjusted diluted EPS(4) 2.5c 1.1c 127.3%
Adjusted operating cash flow(5) 51 39 29.3%
Free cash flow(6) (168) (219) 23.4%
Net debt excluding leases 876 654 33.9%
STATUTORY RESULTS
Operating (loss) / profit (899) 23 n/m
Loss for the period (983) (27) n/m
Basic loss per share (142.9)c (4.3)c n/m
Cash flow from operating activities 31 (7) n/m
See notes on page 4. Full headline results are shown on pages 13, 14 and 20
Ken Gilmartin, CEO, said:
"These results demonstrate continued progress on our turnaround. Our strategy
continues to deliver higher EBITDA and a larger order book, and we are
improving the quality of our business with better pricing and higher margins.
Our Simplification programme is progressing at pace, with nearly half of the
annualised $60 million savings from next year already secured. I am also
pleased that we have achieved all of this while recording our highest level of
employee satisfaction ever, putting Wood in the top quartile of all our peers
and demonstrating that our team is focused and energised on driving Wood to
its full potential.
"We have finalised our views on our exit from lump sum turnkey and large-scale
EPC work and have reflected this in our results today, though crucially this
has not changed our cash guidance. We have also recognised a non-cash goodwill
impairment in our Projects business, which relates to legacy acquisitions.
"Generating sustainable, strong free cash flow continues to be an important
focus for the delivery of our turnaround. Our adjusted operating cash flow was
up in the period, and we continue to anticipate reducing cash drags going
forward. We welcomed Arvind Balan as our new CFO in April and he has brought a
renewed cash focus across the business.
"As we look ahead, we remain confident that our strategy, actions we are
taking and growth potential across our markets will deliver significant value
for our shareholders. We are pleased to reconfirm our outlook today, both for
2024 and 2025, including generating significant free cash flow in 2025."
We are delivering a higher quality business
· Our growth strategy is delivering
o Adjusted EBITDA up 8.5% to $219 million
o Order book up 3.6% to $6.2 billion
· We are improving profitability
o Adjusted EBITDA margin expanded to 7.7%
o Continuation of improved pricing across our pipeline and order book
· Our Simplification programme is moving at pace
o Already secured $25 million of the targeted $60 million annualised savings
from 2025 onwards, with the in-year benefit in 2024 confirmed to be around $10
million
· Finalised our views on exit from LSTK and large-scale EPC
o $140 million exceptional charge, consisting of $53 million write-off of
receivable balances, $61 million of new provisions, and $26 million of final
settlements (see pages 16-17)
o Anticipated cash impacts spread over many years
o No change to our cash guidance
· We continue to win exciting and complex work
o 6-year contract with Shell for the world's largest floating offshore LNG
facility in Australia
o Completed FEED for the first phase of Aramco's carbon capture project in
Saudi Arabia
· Significant sustainable solutions business(7)
o Sustainable solutions revenue of c.$600 million represents 21% of Group
revenue
o Around 40% of factored sales pipeline now in sustainable solutions
· We continue to evolve our portfolio in line with our strategic
priorities
o CEC Controls sale agreed, net proceeds of c.$30 million expected in the
second half
o Disposal of Ethos Energy JV progressing well, expected to complete in the
second half
We are focused on cash delivery
· We have made significant progress on our turnaround to date
o Delivered EBITDA growth above targets
o Expanded our margins and will continue to do so
o Now a higher quality business with no lump sum turnkey work remaining in
our order book
· The next stage of our turnaround is to deliver cash
o Operating cash flow continues to improve
o Working capital focus year-round, with a clear plan to make significant
improvements
o Cash drags will continue to reduce as outlined previously
· We are nearing the inflection point in our cash journey in 2025
o Underlying business is highly cash generative
o Pathway to significant free cash flow from 2025 onwards
Reconfirmed 2024 outlook
· 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
· Operating cash flow 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 outflows
will be around $125 million, of which c.$50 million relate to our
Simplification programme to deliver around $60 million of savings from 2025,
and now include c.$6 million of Sidara-related costs
· 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
Reconfirmed 2025 outlook
· Adjusted EBITDA growth in 2025 above our medium-term targets,
with the c.$60 million of annualised Simplification benefits on top of the
originally targeted mid to high single digit growth
· We expect to generate significant free cash flow in 2025
HY24 financial highlights
· Revenue of $2.8 billion was down 5% with growth in Operations
offset by lower revenue in Projects given lower pass-through activity, our
strategic shift away from EPC and weakness in our minerals business
· Pass-through revenue in the period was $405 million compared to
$506 million in HY23, with all the reduction in our Projects business.
Excluding pass-through, Group revenue was down 2%
· Adjusted EBITDA of $219 million was up 8.5% with margin expansion
more than offsetting the revenue performance, reflecting our shift to a higher
quality business
· Adjusted EBITDA margin of 7.7% compared to 6.8% last year, helped
by improved pricing and lower EPC and pass-through work in Projects
· Adjusted EBIT up 14.2% to $102 million
· Adjusted diluted EPS up 127.3% to 2.5c, reflects the EBIT growth
and a lower tax charge
· Free cash flow of $(168) million includes the typical seasonality
of our working capital profile and the expected phasing of exceptional cash
flows ($75 million in the first half)
· As a result, net debt (excluding leases) was $876 million at 30
June 2024
HY24 statutory results
· Operating loss of $899 million reflects the exceptional items in
the period
· Exceptional items of $966 million (pre-tax)
o $815 million impairment of goodwill and intangibles (see page 17 for
details)
o $140 million losses related to our exit from LSTK and large-scale EPC work
o $12 million of Simplification costs
o $6 million of costs related to Sidara's takeover proposals in the period
· Loss for the period of $983 million
· Basic loss per share of 142.9c
· Cash flow from operating activities of $31 million was
significantly improved on last year
Presentation
A presentation with Ken Gilmartin (CEO), Arvind Balan (CFO) and Jennifer
Richmond (CSO) will be webcast at 8:00am (UK time) today, followed by a
Q&A session. The webcast is available at:
https://edge.media-server.com/mmc/p/jjv68c9f
(https://edge.media-server.com/mmc/p/jjv68c9f) .
The webcast and transcript will be available after the event at
www.woodplc.com/investors (http://www.woodplc.com/investors) .
For further information:
Simon McGough, President, Investor Relations +44 (0)7850 978 741
Vikas Gujadhur, Senior Manager, Investor Relations +44 (0)7855 987 399
Alex Le May / Ariadna Peretz, FTI Consulting +44 (0)20 3727 1340
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.
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 HY24 to HY23 restated at HY24 currency rates.
Note 1: Order book comprises work 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 JV order book. Order book is
presented as an indicator of the visibility of future revenue.
Note 2: A reconciliation of adjusted EBITDA to operating profit is shown in
note 2 to the financial statements.
Note 3: 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 4: A reconciliation of adjusted diluted EPS to basic EPS is shown in note
6 of the financial statements.
Note 5: Adjusted operating cash flow refers to adjusted cash generated from
operations, as shown on page 20 of the Financial Review. This is a metric used
by management to monitor business performance throughout the year.
Note 6: Free cash flow, a key measure of shareholder value creation, is
defined as all cash flows before M&A and dividends. It includes all
mandatory payments the Group makes such as interest, tax, and exceptional
items. It excludes the impacts of IFRS 16 (Leases) accounting and FX. A
reconciliation of free cash flow to statutory cash flow statement is shown on
pages 25-26.
Note 7: 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.
Note 8: Various businesses have been transferred between business units in the
period:
(i) Part of Life Sciences business was transferred from
Consulting to Projects
(ii) Power business in the UK was transferred from
Projects to Investment Services
(iii) Industrial Boilers business moved from Investment
Services to Operations
(iv) Downstream & Chemicals operations business moved
from Operations to Investment Services
The results for our Business Units (as shown on pages 8 to 11 have been
restated for these changes. There is no impact on the Group's total results. A
summary of changes is shown on page 12.
CEO STATEMENT
We continue to make good progress on our strategy as we deliver a higher
quality business. The first half of this year saw continued growth in adjusted
EBITDA, with a significant expansion in our margin, and a higher order book.
Our Simplification programme is moving at pace, on track to deliver c.$60
million of annualised savings from 2025. We also agreed the disposal of CEC
Controls as part of the evolution of our portfolio in line with our strategic
priorities, with the sale of our Ethos Energy JV progressing well.
Financial results
Revenue reflects the shift in our business
Group revenue of $2.8 billion was down 5% with good growth in Operations
offset by lower revenue in Projects given lower pass-through activity, our
strategic shift away from EPC work and weakness in our minerals business.
Excluding pass-through revenue, Group revenue was down 2%.
Improved profitability
Our adjusted EBITDA of $219 million was up 9% on last year. This reflects a
significant expansion in our adjusted EBITDA margin from 6.8% to 7.7%. This
reflects both improved pricing and the change in revenue mix, with less
pass-through activity and large-scale EPC work.
Our adjusted EBIT was up 14% to $102 million, reflecting the growth in EBITDA,
while our adjusted diluted EPS increased by 127% to 2.5 cents.
Statutory results
We made an operating loss in the period of $899 million. This primarily
reflects an impairment of goodwill of $815 million and $140 million of charges
related to the exit of LSTK and large-scale EPC business.
The goodwill impairment relates to legacy acquisitions and reflects both
higher discount rates, due in part to increased market volatility, and a more
prudent view on growth assumptions, partly reflecting the geo-political
environment in our markets.
We made the strategic decision to exit the lump sum turnkey and large-scale
EPC work in 2022. The exit from this type of work has taken time, with
multiple contracts being wound down. We have now finalised our view on the
exit from such work, including a detailed review of contract positions, an
assessment of the current material exposure and risks on remaining EPC
contracts, and an assessment of the recoverability of outstanding receivable
balances.
As a result of these updated views, we have recognised a $140 million
exceptional charge, consisting of $53 million write-off of receivable
balances, $61 million of new provisions, and $26 million related to final
settlements. The anticipated cash impacts of these charges are spread over
many years and are included in our unchanged cash guidance.
Cash performance in line with our expectations
We continue to see significant improvements in our adjusted operating cash
flow, generating $51 million in the period despite the typical first half
working capital outflow in our business. We expect our adjusted operating cash
flow to be stronger in the second half.
Our free cash outflow of $168 million includes $75 million of exceptional cash
costs. We expect exceptional cash costs for the full year to be around $125
million.
Sidara takeover proposals
During the period, Dar Al-Handasah Consultants Shair and Partners Holdings Ltd
("Sidara") made four unsolicited proposals to acquire Wood. On 5 August 2024,
after an extended period of detailed engagement, Sidara announced that it did
not intend to make an offer for Wood in light of rising geopolitical risks and
financial market uncertainty.
We do not believe that those geopolitical risks pose a material risk to Wood,
nor the long-term value of the Group.
We expect to incur around $11 million of costs related to these proposals,
which will be partially reimbursed by Sidara under an agreement for external
costs coverage. The amount of $5.5 million was recognised as an exceptional
item in the period, with cash costs in the first half of $1 million. The net
cash costs in the second half are expected to be around $5 million.
We are delivering a higher quality business
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. Highlights in the first half of the year
include:
· Delivering an inspired culture - a record high employee net
promoter score of +34, an improvement of 19 points since the beginning of our
strategic journey and moving Wood from the bottom quartile to the top quartile
amongst our peers.
· Delivering performance excellence - our order book continues to
grow and crucially we continue to see a higher gross margin coming through the
work we are winning.
· Delivering profitable growth - expanding our adjusted EBITDA
margin to 7.7% through improved pricing and business mix.
We continue to win exciting and complex work across our markets. Highlights in
the first half included:
· 6-year contract with Shell for the world's largest floating
offshore LNG facility in Australia
· Contracts with TotalEnergies for flare gas recovery in the UK
North Sea and Iraq
· EPCm contract with Antofagasta for its Nueva Centinela copper
project in Chile
We also completed the FEED for the first phase of Aramco's carbon capture
project in Saudi Arabia, which is expected to be the world's largest carbon
capture and sequestration hub upon completion.
A significant sustainable solutions business
Wood is an enabler of net zero, providing solutions across decarbonisation,
energy transition and materials for a net zero world. We generated around $600
million of sustainable solutions revenue in the first half of this year,
broadly the same as last year despite the move away from large-scale EPC work.
Sustainable solutions now represent 21% of revenue and 39% of our factored
sales pipeline.
Our Simplification programme is moving at pace
We set out a Simplification programme in March 2024 to help us deliver higher
margins while remaining focused on business growth. This programme will
simplify the way we work by reducing complexity in our functional structure,
processes and procedures to ultimately create a more efficient and agile Wood.
The programme will also reduce central function costs, deliver IT savings and
reduce property costs.
In total, the programme is expected to generate annualised savings of around
$60 million from 2025, with a benefit in FY24 of around $10 million. The cash
costs to achieve this programme are expected to be around $70 million, with
around $50 million in FY24 and around $20 million in FY25.
We are moving at pace in rolling out this programme, with the first phase of
right-sizing central functions now complete. We have already secured $25
million annualised savings of the targeted $60 million annualised savings from
2025, and cash costs of $10 million were incurred in the first half of this
year.
We continue to evolve our portfolio
In August 2024, we signed an agreement to sell CEC Controls for a cash
consideration of $30 million. CEC Controls is an industrial and process
control systems business within our Consulting business, and generated $66
million of revenue and $6 million of adjusted EBITDA in 2023.
The sale of our Ethos Energy joint venture is progressing well and is expected
to complete in the second half.
We are focused on cash delivery
We have made great progress on our turnaround, with EBITDA growth ahead of our
targets and significant improvements in the quality of our business. We are
focused on cash delivery to secure the final stage of our turnaround,
delivering significant free cash flow.
We continue to expect to grow operating cash. To accelerate this further, we
have launched a cash plan to improve our working capital across the Group
year-round. This plan includes measures such as enhancing our management
information, increasing the frequency of reviews, improving receivables
collection and reviewing changes to incentive mechanisms for our employees.
The continued progress in operating cash flow, combined with reducing capital
expenditure and the reducing drag from exceptional cash outflows, is expected
to lead to significant free cash flow generation from 2025 onwards.
Reconfirmed 2024 outlook
We 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.
Operating cash flow will 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 outflows will be in
line with our previous guidance of around $125 million, of which c.$50 million
relate to our Simplification programme to deliver around $60 million of
savings from 2025, and now include c.$6 million of Sidara-related costs.
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.
Reconfirmed 2025 outlook
Adjusted EBITDA growth in 2025 is expected to be above our medium-term
targets, with the c.$60 million of annualised Simplification benefits on top
of the originally targeted mid to high single digit growth.
We expect to generate significant free cash flow in 2025.
Refinancing the Group's debt facilities
The majority of the Group's debt facilities mature in October 2026. The Group
recognises the increasing financing risks associated with the global
macroeconomic and geo-political landscape and will be looking to start the
refinancing of our debt facilities in the second half of 2024, working with
the Group's relationship banks and the public and private debt markets.
BUSINESS REVIEWS
CONSULTING
Our Consulting business provides technical consulting, digital consulting, and
energy asset development. It specialises in decarbonisation and digital
solutions that open opportunities across our other business units.
Financial review
HY24 HY23 Movement At constant currency
$m Restated(1) % %
$m
Revenue 342 344 (0.5)% (0.9)%
Adjusted EBITDA(2) 39 40 (0.7)% (0.7)%
Adjusted EBITDA margin 11.5% 11.5% - -
Adjusted EBIT 30 30 0.8%
Adjusted EBIT margin 8.9% 8.8% 0.1ppts
Order book 532 579 (8.1)% (9.0)%
Headcount 3,924 3,806 3.1%
1. Restated for the transfer of Life Sciences from Consulting to Projects in
HY24, see page 12.
2. Adjusted EBITDA includes $nil from JVs (HY23: $nil). Revenue does not
include any contribution from JVs.
Revenue of $342 million was broadly in line with last year, with strong growth
in digital consulting offset by lower activity across technical consulting and
the phasing of work in our energy asset development business.
Adjusted EBITDA of $39 million was broadly flat compared to last year, with a
stable margin reflecting the early benefits of improved pricing offset by
higher overhead costs.
The order book at 30 June 2024 was $532 million, down 8% on last year due to
the phasing of some large client programmes and general market hesitancy in
some of our key markets as clients wait for more certainty on political and
regulatory outcomes.
Operational review
Business growth in the period was led by our digital consulting business,
helped by the growing demand across our clients for help in their digital
transformation journeys. Technical consulting had a slower start to the year,
with lower activity across materials and modest growth across energy. We
expect to see activity levels pick up in the second half, helped by new
business wins, enhanced contribution from key hires and a focus on optimising
overhead costs.
Sustainable solutions revenue was c.$100 million, representing around 30% of
Consulting revenue.
Key awards in the period across Consulting included:
· Appointed digital transformation partner for two major energy
companies in the Middle East
· Carbon Advisory work with Kuwait National Petroleum Company
· Appointed lead specialist consultant for Sunrise JV's Greater
Sunrise Development, located between Timor-Leste and Australia's Northern
Territory
Outlook for 2024
We expect strong growth in adjusted EBITDA in 2024, all weighted to the second
half as performance and pricing benefits ramp up and overhead cost control
improves margin.
PROJECTS
Our Projects business provides complex engineering design and project
management across energy and materials markets including oil and gas,
chemicals, minerals and life sciences.
Financial review
HY24 HY23 Movement At constant currency
Restated(1)
$m
$m % %
Revenue(1) 1,084 1,239 (12.5)% (12.5)%
Adjusted EBITDA(2) 96 93 2.5% 2.6%
Adjusted EBITDA margin 8.8% 7.5% 1.3ppts 1.3ppts
Adjusted EBIT 47 49 (3.4)%
Adjusted EBIT margin 4.3% 3.9% 0.4ppts
Order book 2,074 2,110 (1.7)% (1.7)%
Headcount 13,855 14,144 (2.0)%
1. Restated for the transfers of Life Sciences from Consulting to Projects,
and Power UK from Projects to IVS, in HY24. See page 12.
2. Pass-through revenue, which generates only a small or nil margin, was
around $110 million (HY23: c.$220 million).
2. Adjusted EBITDA includes $1 million from JVs (HY23: $2 million). Revenue
does not include any contribution from JVs.
Revenue of $1,084 million was 13% lower than last year mainly reflecting lower
pass-through revenue and the roll-off of EPC work in line with our strategic
shift away from this type of work. Excluding these, revenue was down 1% with
continued good growth in oil and gas offset by weakness in our minerals
business.
Adjusted EBITDA of $96 million was 3% higher than last year, with good growth
in oil and gas offsetting weakness in our minerals and life sciences
businesses. Our adjusted EBITDA margin increased to 8.8%, helped by an
improved revenue mix with less pass-through and EPC work. In addition to these
adjusted results, $140 million of contract losses were recognised as
exceptional items, see details in the Financial Review.
The order book at 30 June 2024 was $2,074 million, down 2% compared to last
year with good growth across energy offset by weakness across minerals and
life sciences.
Operational review
The strategic shift in our Projects business away from LSTK and large-scale
EPC is now complete.
Business growth in the period was mixed with strong growth across energy and
weakness in our minerals business. This reflects both a weak end market and
our relative small market presence today, and we expect a recovery in the
second half as new orders come through.
Key awards in the period included:
· Detailed engineering design scope for Woodside's Trion project in
the Gulf of Mexico
· EPCm contract with Antofagasta for its Nueva Centinela copper
project in Chile
Sustainable solutions revenue was c.$260 million, representing c.25% of
Projects revenue.
Outlook for 2024
We continue to expect adjusted EBITDA growth for the year, weighted to the
second half. This will be helped by an anticipated improvement in our minerals
business and a reduction in our overall cost base. Revenue is expected to be
lower than the prior year given our shift away from LSTK and large-scale EPC
work, pass-through activity levels and the first half weakness in minerals.
OPERATIONS
Our Operations business manages and optimises our customers' assets including
decarbonisation, maintenance, modifications, brownfield engineering, and asset
management through to decommissioning.
Financial review
HY24 HY23 Movement At constant currency
$m Restated(1) % %
$m
Revenue(2,3) 1,302 1,206 7.9% 7.9%
Adjusted EBITDA(3,4) 91 80 13.0% 13.0%
Adjusted EBITDA margin 7.0% 6.7% 0.3ppts 0.3ppts
Adjusted EBIT 63 53 18.3%
Adjusted EBIT margin 4.8% 4.4% 0.4ppts
Order book 3,267 3,078 6.2% 6.0%
Headcount 16,120 14,498 11.2%
1. Restated for the transfers of Industrial Boilers from Investment Services
to Operations, and Downstream & Chemicals from Operations to Investment
Services, in HY24. See page 12.
2. Pass-through revenue, which generates only a small or nil margin, was
around $280 million (HY23: c.$280 million).
3. HY23 includes the Gulf of Mexico labour operations business that was sold
in March 2023. In HY23, this business contributed $21 million of revenue and
$2 million of adjusted EBITDA.
4. Adjusted EBITDA includes $6 million from JVs (HY23: $6 million). Revenue
does not include any contribution from JVs.
Revenue of $1,302 million was 8% higher than last year with higher activity
levels across Europe and the Middle East.
Adjusted EBITDA of $91 million was 13% higher than last year reflecting the
revenue growth, strong business performance and our shift towards higher value
services. This was reflected in the adjusted EBITDA margin expanding to 7.0%.
The order book at 30 June 2024 was $3,267 million, 6% higher than last year
and reflecting good growth across the business including the Shell Prelude
FLNG contract secured in June 2024.
Operational review
The Operations business has continued to benefit from higher activity levels
across geographies driven by increasing demand for energy and the importance
placed on energy security. On top of this strong market backdrop, the business
continues to win significant pieces of work with both existing and new
clients.
Sustainable solutions revenue was c.$200 million, representing around 15% of
Operations revenue.
Key awards in the period included:
· 6-year contract with Shell for the world's largest floating
offshore LNG facility in Australia
· Contracts with TotalEnergies for flare gas recovery in the UK
North Sea and Iraq
· Contract for the redevelopment of the UK's Rough field in
readiness for future hydrogen storage
Outlook for 2024
We expect strong revenue and adjusted EBITDA growth throughout the year,
helped by a continued focus on improved pricing.
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
HY24 HY23 Movement At constant currency
$m Restated(1) % %
$m
Revenue 116 197 (41.3)% (41.4)%
Adjusted EBITDA(1) 24 19 22.0% 22.5%
Adjusted EBITDA margin 20.4% 9.8% 10.6ppts 10.6ppts
Adjusted EBIT 12 7 60.2%
Adjusted EBIT margin 10.2% 3.6% 6.6ppts
Order book 336 225 49.4% 49.4%
Headcount 1,420 1,638 (13.3)%
1. Restated for the transfers of Power UK and Downstream & Chemicals to
Investment Services, and Industrial Boilers from Investment Services to
Operations, in HY24. See page 12.
2. Includes results from our two Turbines joint ventures. Adjusted EBITDA from
these JVs was $26 million in HY24 and $25 million in HY23. Revenue does not
include any contribution from JVs.
Revenue of $116 million was 41% lower than last year, mainly reflecting the
run-down of our facilities business in line with our business plans. This is
also reflected in the lower headcount.
Adjusted EBITDA of $24 million was up 22% compared to last year, and this
includes a broadly flat contribution from our Turbine joint ventures of $26
million in the period. Excluding these, performance was up year-on-year due to
improved overall profitability across businesses.
The order book at 30 June 2024 was $336 million, up 49% on last year, helped
by a 5-year contract renewal in the Downstream & Chemicals business and a
new framework agreement in the Power UK business.
Outlook for 2024
We expect the contribution from our Turbine JVs (before the impact of the
planned disposal of Ethos Energy) to be broadly flat in 2024, with the
performance of weighted to the second half as is typical in these businesses.
CENTRAL COSTS
HY24 HY23 Movement At constant currency %
$m
$m %
Adjusted EBITDA (31) (31) (1.0)% (2.7)%
Adjusted EBIT (50) (51) (0.8)%
Central costs, not allocated to business units, was flat at $31 million in the
period, with cost reductions offset by pay rises at the start of the year.
Outlook for 2024
We expect to see a reduction in central costs of around $10 million from the
benefits of our Simplification programme.
RESTATEMENT FOR BUSINESS TRANSFERS
During the period, various businesses have been transferred between business
units:
· Part of Life Sciences business was transferred from Consulting to
Projects
· Power business in the UK was transferred from Projects to
Investment Services
· Industrial Boilers business moved from Investment Services to
Operations
· Downstream & Chemicals operations business moved from
Operations to Investment Services
HY23 Life Sciences Power UK Industrial Boilers Downstream & Chemicals HY23
reported restated
$m $m
Consulting
Revenue 356 (12) 344
Adjusted EBITDA 38 2 40
Order book 584 (4) 579
Headcount 3,938 (132) 3,806
Projects
Revenue 1,245 12 (18) 1,239
Adjusted EBITDA 92 (2) 4 93
Order book 2,131 4 (26) 2,110
Headcount 14,138 132 (156) 14,114
Operations
Revenue 1,244 23 (61) 1,206
Adjusted EBITDA 77 1 3 80
Order book 3,129 40 (91) 3,078
Headcount 15,135 114 (751) 14,498
IVS
Revenue 141 18 (23) 61 197
Adjusted EBITDA 27 (4) (1) (3) 19
Order book 148 26 (40) 91 225
Headcount 845 156 (114) 751 1,638
The results for our Business Units have been restated for these changes and
there is no impact on the Group's total results.
FINANCIAL REVIEW
Trading performance
Trading performance is presented on the basis used by management to run the
business with adjusted EBITDA including the contribution from joint ventures.
A reconciliation of operating profit to adjusted EBITDA is included in note 2
to the financial statements. A calculation of adjusted diluted EPS is shown on
page 19.
HY24 HY23 FY23
$m $m $m
Continuing operations
Revenue (pre-exceptionals) 2,844.0 2,986.2 5,900.7
Adjusted EBITDA(1) 218.7 201.7 422.7
Adjusted EBITDA margin % 7.7% 6.8% 7.2%
Depreciation (PPE) (13.9) (15.1) (26.2)
Depreciation on right of use asset (IFRS 16) (44.5) (44.8) (103.1)
Impairment of joint venture investments and property, plant and equipment - (0.4) (1.8)
Amortisation - software and system development (58.2) (52.0) (106.6)
Adjusted EBIT 102.1 89.4 185.0
Adjusted EBIT margin % 3.6% 3.0% 3.1%
Amortisation - intangible assets from acquisitions (26.3) (27.2) (54.5)
Tax and interest charges on joint ventures (9.0) (8.3) (16.3)
Exceptional items (150.8) (31.1) (76.7)
Impairment of goodwill (815.0) - -
Operating (loss)/profit (899.0) 22.8 37.5
Net finance expense (52.5) (40.3) (81.5)
Interest charge on lease liability (10.2) (8.5) (18.7)
Loss before taxation from continuing operations (961.7) (26.0) (62.7)
Tax charge (21.6) (30.4) (65.0)
Loss for the period from continuing operations (983.3) (56.4) (127.7)
Profit from discontinued operations, net of tax - 29.4 22.5
Loss for the period (983.3) (27.0) (105.2)
Non-controlling interest (1.4) (2.3) (5.5)
Loss attributable to owners of parent (984.7) (29.3) (110.7)
Number of shares (basic) 689.3 684.9 685.9
Basic loss per share (cents) (142.9) (4.3) (16.1)
In the table above depreciation and amortisation include the contribution from
joint ventures.
In HY24 adjusted EBITDA increased by $17.0 million to $218.7 million primarily
due to improved margin. Adjusted EBITDA margin increased from 6.8% to 7.7% due
in part to reduced low margin pass-through revenue in Projects. Operating loss
of $899.0 million (June 2023: profit $22.8 million) has increased mainly due
to higher exceptional items of $150.8 million (June 2023: $31.1 million) and
an impairment charge of $815 million against goodwill. The reduction in the
tax charge to $21.6 million (June 2023: $30.4 million) is primarily driven by
a reduction in tax on actuarial movements on the UK pension scheme.
The review of our trading performance is contained on pages 8 to 11.
Reconciliation of Adjusted EBIT to Adjusted diluted EPS
HY24 HY23 FY23
$m $m $m
Adjusted EBIT 102.1 89.4 185.0
Tax and interest charges on joint ventures (9.0) (8.3) (16.3)
Adjusted net finance expense (48.1) (34.8) (70.4)
Interest charge on lease liability (10.2) (8.5) (18.7)
Adjusted profit before tax 34.8 37.8 79.6
Adjusted tax charge (16.5) (28.3) (58.3)
Adjusted profit from discontinued operations, net of tax - - (10.2)
Adjusted profit for the period 18.3 9.5 11.1
Non-controlling interest (1.4) (2.3) (5.5)
Adjusted earnings 16.9 7.2 5.6
Number of shares (m) - diluted 689.3 684.9 685.9
Adjusted diluted EPS (cents)(2) 2.5 1.1 0.8
See notes on page 24
Reconciliation to GAAP measures
HY24 HY23 FY23
$m $m $m
Loss before tax from continuing operations (961.7) (26.0) (62.7)
Impairment of goodwill 815.0 - -
Exceptional items 150.8 31.1 76.7
Exceptional items - net finance expense 4.4 5.5 11.1
Amortisation - intangible assets from acquisitions 26.3 27.2 54.5
Adjusted profit before tax 34.8 37.8 79.6
Tax charge 21.6 30.4 65.0
Tax in relation to acquisition amortisation 1.7 2.5 3.7
Tax on exceptional items (6.8) (4.6) (10.4)
Adjusted tax charge 16.5 28.3 58.3
Profit from discontinued operations, net of tax - 29.4 22.5
Discontinued operations, gain on disposal - (29.4) (37.7)
Discontinued items, exceptional items - - 5.0
Adjusted loss from discontinued operations, net of tax - - (10.2)
The reconciliation from adjusted EBIT of $102.1 million (June 2023: $89.4
million) to adjusted earnings of $16.9 million (June 2023: $7.2 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, including
impairment charges against goodwill, 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 16-18. In addition,
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 the first half of 2024 of $84.5 million (June 2023:
$79.2 million) includes $26.3 million of amortisation of intangibles
recognised on the acquisition of Amec Foster Wheeler ("AFW") (June 2023: $27.2
million). Amortisation in respect of software and development costs was $58.2
million (June 2023: $52.0 million) and this largely relates to engineering
software and ERP system development. Included in the amortisation charge for
the period is $0.9 million (June 2023: $0.7 million) in respect of joint
ventures.
The total depreciation charge in the first half of 2024 amounted to $58.4
million (June 2023: $59.9 million) and includes depreciation on right of use
assets of $44.5 million (June 2023: $44.8 million). Included in the
depreciation charge for the period is $7.0 million (June 2023: $5.4 million)
in respect of joint ventures.
The impairment charge recognised against goodwill amounts to $815 million and
is recorded within exceptional items by virtue of its size and nature. The
impairment charge was triggered by higher discount rates and an increase in
the risk factors applied to the value in use model, to reflect more closely
market observed multiples. The higher discount rates are driven by market
volatility and increases to the cost of debt. The directors have observed
that the market capitalisation of the Group has remained low for several years
and the levels of goodwill that arose from large historical acquisitions were
no longer supported by the expected future cash flows.
Net finance expense and debt
HY24 HY23 FY23
$m $m $m
Interest on bank borrowings 37.7 27.5 59.4
Interest on US Private Placement debt 8.0 8.2 16.6
Discounting relating to asbestos, deferred consideration and other liabilities 5.9 6.9 12.3
Other interest, fees and charges 8.8 11.0 12.6
Total finance expense excluding joint ventures and interest charge on lease 60.4 53.6 100.9
liability
Finance income relating to defined benefit pension schemes (7.1) (9.7) (18.3)
Other finance income (0.8) (3.6) (1.1)
Net finance expense 52.5 40.3 81.5
Interest charge on lease liability 10.2 8.5 18.7
Net finance charges in respect of joint ventures 3.8 3.5 6.5
Net finance expense including joint ventures, continuing Group 66.5 52.3 106.7
Interest on bank borrowings of $37.7 million (June 2023: $27.5 million)
primarily relates to interest charged on borrowings under the $1.2 billion
Revolving Credit Facility ('RCF') which matures in October 2026 and the $200.0
million term loan which also matures in October 2026. The increase in interest
on bank borrowings of $10.2 million is explained by the higher drawings
throughout the first half of 2024, compared with the same period in 2023.
The interest charge on US Private Placement debt is broadly in line with the
same period in 2023. The Group had $352.5 million (December 2023: $352.5
million) of unsecured loan notes outstanding at 30 June 2024, maturing between
2024 and 2031 with around 75% due in 2025 or later.
Other interest, fees and charges amount to $8.8 million (June 2023: $11.0
million) and principally relates to the interest on the receivables factoring
facilities totalling $5.9 million and amortisation of bank facility costs of
$1.3 million (June 2023: $1.9 million).
In total, the Group had undrawn facilities of $686.8 million as at 30 June
2024, of which $602.8 million related to the revolving credit facility.
The Group recognised interest costs in relation to lease liabilities of $10.2
million (June 2023: $8.5 million) which relates to the unwinding of discount
on the lease liability.
Included within the discounting balance of $5.9 million (June 2023: $6.9
million) is the unwinding of discount on the asbestos provision of $4.4
million (June 2023: $5.5 million).
Net debt excluding leases to adjusted EBITDA (excluding the impact of IFRS 16)
at 30 June was 2.48 times on a covenant basis (December 2023: 2.08 times)
against our covenants of less than 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 3.9 times on a covenant basis
(December 2023: 4.0 times) against our covenant of no less than 3.5 times.
The majority of the Group's debt facilities mature in October 2026. The Group
recognises the increasing financing risks associated with the global
macroeconomic and geo-political landscape and will be looking to start the
refinancing of our debt facilities in the second half of 2024, working with
the Group's relationship banks and the public and private debt markets.
Exceptional items
HY24 HY23 FY23
$m $m $m
LSTK and large-scale EPC 140.0 21.2 45.1
Redundancy and restructuring costs 12.1 - -
Asbestos yield curve and costs (6.8) 5.3 29.4
Impairment of goodwill 815.0 - -
Takeover related costs 5.5 4.6 4.8
Investigation support costs and provisions - - (2.6)
Exceptional items included in continuing operations, before interest and tax 965.8 31.1 76.7
Unwinding of discount on asbestos provision 4.4 5.5 11.1
Tax credit in relation to exceptional items (0.8) (5.2) (0.2)
Release of uncertain tax provision - (7.4) (7.4)
Derecognition of deferred tax assets due to UK pension actuarial movements 7.6 17.2 18.0
Exceptional items included in continuing operations, net of interest and tax 977.0 41.2 98.2
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.
LSTK and large-scale EPC
The Group made a strategic decision in 2022 to exit certain business
segments and following that decision, we ceased to operate in the
large-scale EPC or lump sum turnkey ("LSTK") business segment. In recent
years, the Group has wound down the remaining contracts, however we continue
to have a significant balance sheet position and claims exposure across some
legacy contracts. The closure of these businesses, has reduced our leverage
to negotiate commercial close outs and the staff involved have now all been
exited from the business, making claims recovery or defence of litigation
considerably more challenging. Accordingly, the Group has carried out
a detailed review of the contract positions, including an assessment of the
current material exposures and risks on remaining LSTK EPC contracts; an
assessment of the recoverability of outstanding receivables balances; a review
of the Projects risk register and legal watch lists of all material cases.
This review was conducted by the appropriate levels of senior management
within the Group and business units.
Following this review, an exceptional charge of $140 million was taken to the
income statement and is composed of $53 million of provisions against trade
and other receivables, $61 million of provisions for additional claims and
$26 million of final settlements. These charges were recorded within
exceptional items by virtue of their size and nature. The provisions of $53
million recorded against trade and other receivables have been taken in the
first half of 2024 following engagement with certain of our clients in the EPC
business where the clients are disputing the settlement of the
receivables. The additional claims provision represents managements best
estimate to close out the remaining claims within the LSTK and large-scale EPC
business. The final settlement charge represents the additional cost to
close out a series of solar EPC contracts on which we negotiated a full and
final settlement agreement with the client.
Redundancy, restructuring and integration costs
The Group announced the Simplification programme in March 2024 which was set
out to help the Group deliver higher margins while remaining focussed on
business growth. This programme led to a reduction in the number of central
functional roles by placing greater ownership and accountability for
functional activities into the business units. As of 30 June 2024, this
phase of work was largely complete. The subsequent phases of the
Simplification programme aims to deliver IT savings, save property costs and
reduce complexity in the Group's functional structure. We will also expand
our shared services model. These phases will be largely complete by the
first half of 2025.
The costs incurred in relation to Simplification amount to $12.1 million and
primarily relate to costs associated with the headcount reductions in the
central functions. The total cost of Simplification is around $70 million,
with around $50 million of costs expected to be incurred in 2024 and the
balance in 2025. The majority of these remaining costs relate to the exit of
certain IT contracts; the notice to terminate was served in July 2024 and
therefore does not meet the criteria for recognition in the interim financial
statements.
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 outside the Group's control. Excluding these
amounts from the trading results improves the understandability of the
underlying trading performance of the Group.
The $6.8 million credit (June 2023: charge $5.3 million) principally comprises
a $8.2 million yield curve credit (June 2023: charge $2.0 million) and charges
of $1.4 million (June 2023: $3.3 million) of costs in relation to managing the
claims. The yield curve credit recognised in 2024 is principally due to an
increase in the 27 year blended yield curve rate to 4.6% (Dec 2023: 3.64%).
In addition, $4.4 million of interest costs which relate to the unwinding of
discount on the asbestos provision are shown as exceptional (June 2023: $5.5
million).
Impairment of goodwill
The impairment charge recognised against goodwill amounts to $815 million and
is recorded within exceptional items by virtue of its size and nature. The
impairment charge was triggered by higher discount rates and an increase in
the risk factors applied to the value in use model, to reflect more closely
market observed multiples. The higher discount rates are driven by market
volatility and increases to the cost of debt. The directors have observed
that the market capitalisation of the Group has remained low for several years
and the levels of goodwill that arose mostly from large historical
acquisitions were no longer supported by the expected future cash flows.
Takeover related costs
During the period, Dar Al-Handasah Consultants Shair and Partners Holdings
Limited ("Sidara") made four unsolicited proposals to acquire Wood. On 5
August 2024, after an extended period of detailed engagement, Sidara announced
that it did not intend to make an offer for Wood in light of rising
geopolitical risks and financial market uncertainty.
We incurred $5.5 million of costs related to these proposals in the period to
30 June 2024. The cash costs in the second half are expected to be around $5
million, taking the total expected gross cost to be around $11 million. This
total expected gross cost will be partially reimbursed by Sidara under an
agreement for external costs coverage.
Tax
An exceptional tax charge of $6.8 million (June 2023: $4.6 million) has been
recorded during the period. It consists of a $0.8 million tax credit on
exceptional items (June 2023: $5.2 million), no movement in relation to
uncertain tax provisions, offset by an exceptional charge of $7.6 million
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 $7.6 million of deferred tax assets has
been charged through exceptional items consistent with the treatment in prior
periods.
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.
HY24 HY23 FY23
$m $m $m
Loss from continuing operations before tax (961.7) (26.0) (62.7)
Profit from discontinued operations, net of tax and before exceptional items - - (10.2)
Tax charge in relation to joint ventures 5.2 4.8 9.8
Amortisation (note 10) 83.6 78.5 159.7
Exceptional items (continuing operations) 970.2 36.6 87.8
Profit before tax, exceptional items and amortisation 97.3 93.9 184.4
Effective tax rate on continuing operations (excluding tax on exceptional 32.2% 36.0% 35.6%
items and amortisation)
Tax charge (excluding tax on exceptional items and amortisation) 31.4 33.8 65.7
Tax charge in relation to joint ventures (5.2) (4.8) (9.8)
Tax credit in relation to exceptional items (continuing operations) (0.8) (12.6) (7.6)
Derecognition of deferred tax assets due to UK pension actuarial movements 7.6 17.2 18.0
Tax credit in relation to amortisation (11.4) (3.2) (1.3)
Tax charge from continuing operations per the income statement 21.6 30.4 65.0
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 2024 are
withholding taxes suffered on which full double tax relief is not available
and controlled foreign company charges, less the impact of the utilisation of
unrecognised deferred tax assets, primarily in the UK, recognising forecasts
of improved profitability.
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 decrease in the
effective tax rate for the first half of 2024 when compared to June 2023 is
largely a result of the impact of forecast profits for the UK resulting in
utilisation of previously unrecognised deferred tax assets.
Adjusted tax charge
As noted on page 14 our adjusted tax charge was $16.5 million (June 2023:
$28.3 million), representing an adjusted effective tax rate of 47.4% (June
2023: 74.9%). The lower adjusted rate of 47.4% in 2024 is principally due to
some improvements in the forecast geographical mix of profits, particularly in
the UK. 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 US due to losses.
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 period ended 30 June 2024, the Group reported a basic loss (June 2023:
loss) per ordinary share, therefore the effect of dilutive ordinary shares are
excluded (June 2023: 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.
HY24 HY23 FY23
Total Total Total
$m $m $m
(Losses)/earnings attributable to equity shareholders (basic pre-exceptional) (7.7) (17.5) (45.2)
Exceptional items, net of tax (977.0) (11.8) (65.5)
(Losses)/earnings attributable to equity shareholders (basic) (984.7) (29.3) (110.7)
Number of shares (basic) 689.3 684.9 685.9
Number of shares (diluted) 689.3 684.9 685.9
Basic losses per share (cents) (142.9) (4.3) (16.1)
Diluted losses per share (cents) (142.9) (4.3) (16.1)
(984.7) (29.3) (110.7)
Losses attributable to equity shareholders
Exceptional items, net of tax 977.0 11.8 65.5
Amortisation of intangibles on acquisition, net of tax 24.6 24.7 50.8
Earnings attributable to equity shareholders (adjusted diluted) 16.9 7.2 5.6
Earnings attributable to equity shareholders (adjusted basic) 16.9 7.2 5.6
Number of shares (diluted) 689.3 684.9 685.9
Number of shares (basic) 689.3 684.9 685.9
Adjusted diluted (cents) 2.5 1.1 0.8
Adjusted basic (cents) 2.5 1.1 0.8
Basic loss per share for the period was 142.9 cents (June 2023: 4.3 cents).
The increase in losses per share is driven by the exceptional items, which
includes the goodwill impairment and LSTK and large-scale EPC additional
claims provisions and receivable write downs.
Capital allocation
Our capital allocation policy remains unchanged and starts with having a
strong balance sheet. 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:
Excluding leases Impact of leases Excluding leases Impact of leases
HY24 HY24 Total HY23 HY23 Total Total
$m $m HY24 $m $m HY23 FY23
$m $m $m
Adjusted EBITDA 166.2 52.5 218.7 151.3 50.4 201.7 412.5
Less JV EBITDA (25.8) (3.5) (29.3) (25.2) (3.6) (28.8) (73.6)
JV Dividends 13.7 - 13.7 8.0 - 8.0 15.6
Adjusted decrease in provisions (note 6) (9.1) - (9.1) (11.9) - (11.9) (22.1)
Other 8.3 - 8.3 10.8 - 10.8 17.0
Cash flow generated from operations pre working capital 153.3 49.0 202.3 133.0 46.8 179.8 349.4
Increase in receivables (68.1) - (68.1) (164.4) - (164.4) (67.7)
Adjusted (decrease)/increase in payables (note 6) (34.9) 6.0 (28.9) 68.7 - 68.7 12.7
Decrease in inventory 0.4 - 0.4 1.9 - 1.9 1.5
Adjusted working capital movements (102.6) 6.0 (96.6) (93.8) - (93.8) (53.5)
Adjusted cash generated from operations (note 6) 50.7 55.0 105.7 39.2 46.8 86.0 295.9
Purchase of property, plant and equipment (8.5) - (8.5) (9.2) - (9.2) (18.8)
Proceeds from sale of property, plant and equipment 2.7 - 2.7 1.4 - 1.4 8.2
Purchase of intangible assets (41.8) - (41.8) (68.0) - (68.0) (126.4)
Interest received 0.8 - 0.8 3.6 - 3.6 1.1
Interest paid (54.6) - (54.6) (44.8) - (44.8) (81.7)
Adjusted tax paid (38.4) - (38.4) (43.0) - (43.0) (97.7)
Non-cash movement in leases - (46.9) (46.9) - (27.7) (27.7) (160.9)
Other (3.6) - (3.6) 0.2 - 0.2 1.4
Free cash flow (excluding exceptionals) (92.7) 8.1 (84.6) (120.6) 19.1 (101.5) (178.9)
Cash exceptionals (75.2) - (75.2) (98.7) 5.6 (93.1) (133.9)
Free cash flow (167.9) 8.1 (159.8) (219.3) 24.7 (194.6) (312.8)
FX movements on cash and debt facilities (14.7) 4.7 (10.0) (21.9) (7.5) (29.4) (22.9)
Divestments - - - (19.8) - (19.8) (22.5)
(Increase)/decrease in net debt (182.6) 12.8 (169.8) (261.0) 17.2 (243.8) (358.2)
Opening net debt (693.5) (400.8) (1,094.3) (393.2) (342.9) (736.1) (736.1)
Closing net debt (876.1) (388.0) (1,264.1) (654.2) (325.7) (979.9) (1,094.3)
Closing net debt at 30 June 2024 including leases was $1,264.1 million
(December 2023: $1,094.3 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 30 June 2024 was $388.0 million (December 2023: $400.8
million). All covenants on the debt facilities are measured on a pre-IFRS 16
basis.
Closing net debt excluding leases as at 30 June 2024 was $876.1 million
(December 2024: $693.5 million). The monthly average net debt excluding leases
in H1 2024 was $1,043.3 million (December 2023: $846.4 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 increased by $22.5 million
to $202.3 million from $179.8 million in the period to June 2023 and is mainly
due to an increase in EBITDA of $17.0 million and dividends received from
joint ventures. The other movement of $8.3 million (June 2023: $10.8 million)
is principally comprised of non-cash movements through EBITDA including
share-based charges of $8.8 million (June 2023: $9.8 million).
There was a working capital outflow of $96.6 million (June 2023: $93.8
million) and is principally comprised of an outflow in receivables of $68.1
million which was driven by higher closing DSO.
The Group has utilised receivables financing facilities of $197.2 million at
30 June 2024 (June 2023: $200.0 million, December 2023: $198.2 million). The
facilities are non-recourse to the Group and are not included in our net
debt.
Cash exceptionals of $75.2 million mainly relates to the settlement of known
legal claims and asbestos payments, including the historic SFO investigation
payments of around $36 million which were provided for in FY20 and asbestos
payments of around $27 million. The remaining cash exceptional includes $10
million in relation to Simplification programme.
The free cash outflow of $159.8 million (June 2023: $194.6 million) has
reduced by $34.8 million and is mainly due to lower cash exceptionals of
around $18 million and higher adjusted cash generated from operations of
around $20 million.
Cash conversion, calculated as cash generated from operations as a percentage
of adjusted EBITDA (less JV EBITDA) increased to 55.8% (June 2023: 49.7%,
December 2023: 87.3%) primarily due to higher cash generated from operations
pre working capital.
Summary balance sheet
HY24 HY23 FY23
$m $m $m
Goodwill and intangible assets 3,446.3 4,356.7 4,319.0
Right of use assets 346.9 258.4 355.9
Other non-current assets 832.3 890.3 913.9
Trade and other receivables 1,643.6 1,699.6 1,554.4
Net held for sale assets and liabilities (excluding cash) 72.0 - -
Trade and other payables (1,730.8) (1,797.6) (1,706.7)
Net debt excluding leases (876.1) (654.2) (693.5)
Lease liabilities (388.0) (325.7) (400.8)
Asbestos related litigation (281.5) (302.2) (306.5)
Provisions (194.6) (129.2) (135.3)
Other net liabilities (269.2) (295.1) (258.5)
Net assets 2,600.9 3,701.0 3,641.9
Net current liabilities (41.9) (111.7) (207.0)
At 30 June 2024, the Group had net current liabilities of $41.9 million (June
2023: $111.7 million).
Goodwill and intangible assets amount to $3,446.3 million (December 2023:
$4,319.0 million) and principally comprises of goodwill and intangibles
relating to acquisitions. The reduction of $872.7 million comprises of
goodwill impairment charges of $815.0 million, FX movements of $33.6 million
and amortisation charges of $83.6 million partially offset by software
additions of $59.5 million.
Right of use assets and lease liabilities amount to $346.9 million (December
2023: $355.9 million) and $388.0 million (December 2023: $400.8 million)
respectively.
Trade and other receivables increased to $1,643.6 million partially reflecting
higher DSO. Trade and other payables were broadly in line with the FY23
position.
Net held for sale assets and liabilities relates to the carrying value of our
investment in Ethos Energy. The directors expect to complete a sale of the
joint venture within 12 months of the balance sheet date.
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
$281.5 million (December 2023: $306.5 million).
The net asbestos liability at 30 June 2024 amounted to $299.9 million
(December 2023: $328.1 million) and comprised $281.5 million in provisions
(December 2023: $306.5 million) and $46.2 million in trade and other payables
(December 2023: $50.4 million) less $22.4 million in long term receivables
(December 2023: $23.2 million) and $5.4 million in trade and other receivables
(December 2023: $5.6 million).
The Group expects to have net cash outflows of around $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 June 2024 were $194.6 million (December 2023: $135.3
million) and comprise of project related provisions of $66.8 million (December
2023: $42.2 million), insurance provisions of $38.7 million (December 2023:
$40.7 million), property provisions of $20.8 million (December 2023: $27.4
million) and litigation related provisions of $68.3 million (December 2023:
$25.0 million). The net increase in provisions of $59.3 million includes the
$86.5 million of charges to the income statement, of which $61 million relates
to probable additional claims with respect to LSTK and large-scale EPC losses,
partially offset by $7.6 million of utilisations of the provision and $16.3
million of provision releases.
Full details of provisions are provided in note 12 to the Group 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 30 June 2024, the UK
defined benefit pension plan had a surplus of $366.0 million (December 2023:
$391.9 million) and other schemes had deficits totalling $78.7 million
(December 2023: $80.1 million).
The Group's largest pension scheme, the UK Pension Plan, has total scheme
assets of $2,628.5 million (December 2023: $2,822.5 million) and pension
scheme obligations of $2,262.9 million (December 2023: $2,430.6 million) and
is therefore 116% (December 2022: 119%) funded on an IAS 19 basis. There was a
reduction in scheme liabilities arising from a higher discount rate used in
the actuarial assumptions, however this was offset by a larger foreign
exchange movement.
In assessing the potential liabilities, judgement is required to determine the
assumptions for inflation, discount rate and member longevity. The assumptions
at 30 June 2024 showed an increase in the discount rate which results in lower
scheme liabilities. However, this was outweighed by lower investment
performance on scheme assets resulting in an overall decrease to the surplus
compared to December 2023. Full details of pension assets and liabilities are
provided in note 8 to the Group financial statements.
The latest triennial valuation of the WPP was approved by the Company and the
Trustees in June 2024. As the plan was in surplus no recovery plan or
deficit reduction contributions are required.
Contingent liabilities
Details of the Group's contingent liabilities are set out in note 19 to the
financial statements.
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.
HY24 HY23 FY23
$m $m $m
Operating (loss)/profit per income statement (899.0) 22.8 37.5
Share of joint venture finance expense and tax 9.0 8.3 16.3
Exceptional items (note 4) 965.8 31.1 76.7
Amortisation (including joint ventures) 84.5 79.2 161.1
Depreciation (including joint ventures) 13.9 15.1 26.2
Depreciation of right of use assets 44.5 44.8 103.1
Impairment of PP&E and right of use assets - 0.4 1.8
Adjusted EBITDA (continuing operations) 218.7 201.7 422.7
Discontinued operation
Operating loss (discontinued) - - (15.2)
Exceptional items - - 5.0
Adjusted EBITDA (discontinued operation) - - (10.2)
Total Group Adjusted EBITDA 218.7 201.7 412.5
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. In the period to 30
June 2024, 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 30 June
2024.
4. Net Debt to Adjusted EBITDA cover on a covenant basis is presented in
the table below:
HY24 HY23 FY23
$m $m $m
Net debt excluding lease liabilities (reported basis) (note 15) 876.1 654.2 693.5
Covenant adjustments 16.9 15.7 17.7
Net debt (covenant basis) 893.5 669.9 711.2
Adjusted EBITDA (covenant basis) 359.9 329.4 341.2
Net debt to Adjusted EBITDA (covenant basis) - times 2.48 2.03 2.08
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 is not materially different from
the covenant measure shown above.
The HY24 and HY23 adjusted EBITDA (covenant basis) is calculated on a rolling
12 month basis.
5. Interest cover on a covenant basis is presented in the table below:
HY24 HY23 FY23
$m $m $m
Net finance expense 93.7 96.4 81.5
Covenant adjustments (6.7) (5.2) (1.2)
Non-recurring net finance expense - (21.7) (1.9)
Net finance expense (covenant basis) 87.0 69.5 78.4
Adjusted EBITA (covenant basis) 335.0 299.9 315.0
Interest cover (covenant basis) - times 3.9 4.3 4.0
The difference between Adjusted EBITDA (covenant basis) and Adjusted EBITA
(covenant basis) is $24.9 million (June 2023: $29.5 million) and is mainly
explained by 12-month rolling pre-IFRS 16 depreciation charges of $25.0
million (June 2023: $30.2 million).
The HY24 and HY23 net finance expense (covenant basis) and adjusted EBITA
(covenant basis) is calculated on a rolling 12 month basis.
6. Reconciliation to GAAP measures between consolidated cash flow
statement and cash flow and net debt reconciliation
HY24 HY23 FY23
$m $m $m
Decrease in provisions (33.7) (11.9) (91.0)
Prior year cash exceptionals 24.6 - 68.9
Adjusted movement in provisions (9.1) (11.9) (22.1)
Increase in receivables (68.1) (164.4) (77.5)
Carrying value of business disposed (operating activity) - - 9.8
Adjusted increase in receivables (68.1) (164.4) (67.7)
Decrease in payables (67.0) (19.3) (54.4)
Prior year cash exceptionals 38.1 88.0 67.1
Adjusted (decrease)/increase in payables (28.9) 68.7 12.7
Tax paid (38.4) (105.1) (97.7)
Tax paid on disposal of business - 62.1 -
Adjusted tax paid (38.4) (43.0) (97.7)
Disposal of businesses (net of cash disposed and tax paid) - 42.3 (22.5)
Tax paid on disposal of business - (62.1) -
Divestments - (19.8) (22.5)
Adjusted cash generated from operations 105.7 86.0 295.9
Cash exceptionals (75.2) (93.1) (133.9)
Proceeds on disposal of business (operating activity) - - (15.9)
Cash inflow/(outflow) from operations 30.5 (7.1) 146.1
Proceeds on disposal of business (operating activity) - - 15.9
Purchase of property, plant and equipment (8.5) (9.2) (18.8)
Proceeds from sale of property, plant and equipment 2.7 1.4 8.2
Purchase of intangible assets (41.8) (68.0) (126.4)
Interest received 0.8 3.6 1.1
Interest paid (54.6) (44.8) (81.7)
Adjusted tax paid (38.4) (43.0) (97.7)
Non-cash movement in leases (46.9) (27.7) (160.9)
Other (3.6) 0.2 1.4
Free cash flow (159.8) (194.6) (312.8)
Decreases in provisions and payables, cash generated from operations and tax
paid have been adjusted to show exceptional items separately, in order 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.
John Wood Group PLC
Interim Financial Statements
30 June 2024
Group income statement
for the six month period to 30 June 2024
Unaudited Interim June 2024 Unaudited Interim June 2023 Audited Full Year December 2023
Note Pre- exceptional items Exceptional items Total Pre- exceptional items Exceptional items Total Pre- exceptional items Exceptional items Total
(note 4)
$m
(note 4)
$m
$m
$m
$m
$m (note 4)
$m $m
$m
Continuing operations
Revenue 2,3 2,844.0 (24.0) 2,820.0 2,986.2 - 2,986.2 5,900.7 - 5,900.7
Cost of sales (2,423.5) (116.0) (2,539.5) (2,639.5) (1.2) (2,640.7) (5,191.1) (24.7) (5,215.8)
Gross profit 420.5 (140.0) 280.5 346.7 (1.2) 345.5 709.6 (24.7) 684.9
Administrative expenses (361.3) (10.8) (372.1) (300.2) (9.9) (310.1) (614.4) (31.6) (646.0)
Impairment loss on trade receivables and contract assets (4.8) - (4.8) (7.0) (20.0) (27.0) (23.8) (20.4) (44.2)
Impairment of goodwill 4 - (815.0) (815.0) - - - - - -
Share of post-tax profit from joint ventures 12.4 - 12.4 14.4 - 14.4 42.8 - 42.8
Operating profit/(loss) 2 66.8 (965.8) (899.0) 53.9 (31.1) 22.8 114.2 (76.7) 37.5
Finance income 7.9 - 7.9 13.3 - 13.3 19.4 - 19.4
Finance expense (66.2) (4.4) (70.6) (56.6) (5.5) (62.1) (108.5) (11.1) (119.6)
Profit/(loss)before tax from continuing operations 8.5 (970.2) (961.7) 10.6 (36.6) (26.0) 25.1 (87.8) (62.7)
Taxation 7 (14.8) (6.8) (21.6) (25.8) (4.6) (30.4) (54.6) (10.4) (65.0)
Loss from continuing operations (6.3) (977.0) (983.3) (15.2) (41.2) (56.4) (29.5) (98.2) (127.7)
Discontinued operations
Profit/(loss) from discontinued operations, net of tax - - - - 29.4 29.4 (10.2) 32.7 22.5
Loss for the period (6.3) (977.0) (983.3) (15.2) (11.8) (27.0) (39.7) (65.5) (105.2)
(Loss)/profit attributable to:
Owners of the parent (7.7) (977.0) (984.7) (17.5) (11.8) (29.3) (45.2) (65.5) (110.7)
Non-controlling interests 1.4 - 1.4 2.3 - 2.3 5.5 - 5.5
(6.3) (977.0) (983.3) (15.2) (11.8) (27.0) (39.7) (65.5) (105.2)
Earnings per share (expressed in cents per share)
Basic 6 (142.9) (4.3) (16.1)
Diluted 6 (142.9) (4.3) (16.1)
Earnings per share - continuing operations (expressed in cents per share)
Basic (142.9) (8.6) (19.4)
Diluted (142.9) (8.6) (19.4)
The notes on pages 34 to 56 are an integral part of the interim financial
statements.
Group statement of comprehensive income
for the six month period to 30 June 2024
Unaudited Unaudited Audited
Interim
Full Year
Interim
December
June June
2023
2024 2023
$m $m $m
Loss for the period (983.3) (27.0) (105.2)
Other comprehensive (expense)/income from continuing operations
Items that will not be reclassified to profit or loss
Re-measurement losses on retirement benefit schemes (24.8) (65.5) (82.2)
Movement in deferred tax relating to retirement benefit schemes 7.6 17.2 18.0
Total items that will not be reclassified to profit or loss (17.2) (48.3) (64.2)
Items that may be reclassified subsequently to profit or loss
Cash flow hedges (1.3) (0.1) 3.8
Tax on derivative financial instruments - - (0.4)
Exchange movements on retranslation of foreign operations (47.6) 36.7 58.2
Total items that may be reclassified subsequently to profit or loss (48.9) 36.6 61.6
Other comprehensive expense from continuing operations for the period, net of (66.1) (11.7) (2.6)
tax
Total comprehensive expense for the period (1,049.4) (38.7) (107.8)
Total comprehensive (expense)/income for the period is attributable to:
Owners of the parent (1,050.8) (41.0) (113.3)
Non-controlling interests 1.4 2.3 5.5
(1,049.4) (38.7) (107.8)
Exchange movements on the retranslation of foreign currency net assets would
only be subsequently reclassified through profit or loss in the event of the
disposal of a business.
The notes on pages 34 to 56 are an integral part of the interim financial
statements.
Group balance sheet
as at 30 June 2024
Unaudited Unaudited Audited
Interim
Full Year
Interim
June
June December
2024 2023 2023
Note $m $m $m
Assets
Non-current assets
Goodwill and other intangible assets 10 3,446.3 4,356.7 4,319.0
Property plant and equipment 61.9 79.6 65.3
Right of use assets 346.9 258.4 355.9
Investment in joint ventures 103.5 166.9 178.1
Other investments 50.5 52.8 51.3
Long term receivables 202.3 155.8 184.2
Retirement benefit scheme surplus 8 366.0 393.1 391.9
Deferred tax assets 48.1 42.1 43.1
4,625.5 5,505.4 5,588.8
Current assets
Inventories 14.8 15.7 16.3
Trade and other receivables 1,643.6 1,699.6 1,554.4
Financial assets 3.0 1.2 9.2
Income tax receivable 54.9 56.9 57.9
Assets held for sale 13 72.0 - -
Cash and cash equivalents 15 472.4 450.2 434.0
2,260.7 2,223.6 2,071.8
Total assets 6,886.2 7,729.0 7,660.6
Liabilities
Current liabilities
Borrowings 15 297.1 261.2 315.3
Trade and other payables 1,730.8 1,797.6 1,706.7
Income tax liabilities 109.3 149.5 115.8
Lease liabilities 15 76.0 90.8 83.4
Provisions 12 89.4 36.2 57.6
2,302.6 2,335.3 2,278.8
Net current liabilities (41.9) (111.7) (207.0)
Non-current liabilities
Borrowings 15 1,051.4 843.2 812.2
Deferred tax liabilities 65.2 75.5 76.6
Retirement benefit scheme deficit 8 78.7 70.4 80.1
Lease liabilities 15 312.0 234.9 317.4
Other non-current liabilities 9 88.7 73.5 69.4
Asbestos related litigation 11 281.5 302.2 306.5
Provisions 12 105.2 93.0 77.7
1,982.7 1,692.7 1,739.9
Total liabilities 4,285.3 4,028.0 4,018.7
Net assets 2,600.9 3,701.0 3,641.9
Equity attributable to owners of the parent
Share capital 41.3 41.3 41.3
Share premium 63.9 63.9 63.9
Retained earnings 318.2 1,407.4 1,312.9
Merger reserve 2,298.8 2,290.8 2,298.8
Other reserves (129.3) (105.8) (80.4)
2,592.9 3,697.6 3,636.5
Non-controlling interests 8.0 3.4 5.4
Total equity 2,600.9 3,701.0 3,641.9
The notes on pages 34 to 56 are an integral part of the interim financial
statements.
Group statement of changes in equity
for the six month period to 30 June 2024
Note Equity attributable to owners
of the parent
$m Non-controlling interests
$m
Share Share Retained Merger Other
reserves
Capital Premium Earnings Reserve $m Total
$m $m $m $m
equity
$m
At 1 January 2023 41.3 63.9 1,224.4 2,540.8 (142.4) 3,728.0 1.5 3,729.5
(Loss)/profit for the period - - (29.3) - - (29.3) 2.3 (27.0)
Other comprehensive income/(expense):
Re-measurement losses on retirement benefit schemes - - (65.5) - - (65.5) - (65.5)
Movement in deferred tax relating to retirement benefit schemes - - 17.2 - - 17.2 17.2
Cash flow hedges - - - - (0.1) (0.1) - (0.1)
Net exchange movements on retranslation of foreign currency operations - - - - 36.7 36.7 - 36.7
Total comprehensive (expense)/income - - (77.6) - 36.6 (41.0) 2.3 (38.7)
Transactions with owners:
Dividends paid 5 - - - - - - (0.8) (0.8)
Share based charges 16 - - 9.8 - - 9.8 - 9.8
Purchase of company shares by Employee Share Trust for the Share Incentive 16 - - 0.8 - - 0.8 - 0.8
Plan (SIP)
Transfer from merger reserve to retained earnings - - 250.0 (250.0) - - - -
Transactions with non-controlling interests - - - - - - 0.4 0.4
At 30 June 2023 41.3 63.9 1,407.4 2,290.8 (105.8) 3,697.6 3.4 3,701.0
At 1 January 2024 41.3 63.9 1,312.9 2,298.8 (80.4) 3,636.5 5.4 3,641.9
(Loss)/profit for the period - - (984.7) - - (984.7) 1.4 (983.3)
Other comprehensive income/(expense):
Re-measurement losses on retirement benefit schemes - - (24.8) - - (24.8) - (24.8)
Movement in deferred tax relating to retirement benefit schemes - - 7.6 - - 7.6 - 7.6
Cash flow hedges - - - - (1.3) (1.3) - (1.3)
Net exchange movements on retranslation of foreign currency operations - - - - (47.6) (47.6) - (47.6)
Total comprehensive (expense)/income - - (1,001.9) - (48.9) (1,050.8) 1.4 (1,049.4)
Transactions with owners:
Dividends paid 5 - - - - - - (0.4) (0.4)
Share based charges 16 - - 8.8 - - 8.8 - 8.8
Purchase of company shares by Employee Share Trust for the Share Incentive - - (1.6) - - (1.6) - (1.6)
Plan (SIP)
Transactions with non-controlling interests - - - - - - 1.6 1.6
At 30 June 2024 41.3 63.9 318.2 2,298.8 (129.3) 2,592.9 8.0 2,600.9
The figures presented in the above tables are unaudited.
In June 2023, John Wood Group Holdings Limited paid $250.0m to John Wood Group
PLC in a partial settlement of the promissory note, which was put in place
during 2019. The repayment represented qualifying consideration and as a
result the Company transferred an equivalent portion of the merger reserve to
retained earnings.
Other reserves include the capital redemption reserve, capital reduction
reserve, currency translation reserve and the hedging reserve.
The notes on pages 34 to 56 are an integral part of the interim financial
statements.
Group cash flow statement
for the six month period to 30 June 2024
Unaudited Unaudited Audited
Interim
Interim
Full Year
June 2023
June 2024 Dec 2023
Note $m $m $m
Reconciliation of loss to cash generated used in operations:
Loss for the period (983.3) (27.0) (105.2)
Adjustments:
Depreciation 10.4 13.6 21.0
Depreciation on right of use assets 41.0 40.9 95.2
Gain on disposal of leases - - (1.7)
Loss/(gain) on disposal of property plant and equipment - 0.1 (2.6)
Impairment of goodwill 10 815.0 - -
Impairment of property, plant and equipment - 0.4 1.8
Gain on disposal of investment in joint ventures - - (6.2)
Amortisation of intangible assets 10 83.6 78.5 159.7
Share of post-tax profit from joint ventures (12.4) (14.4) (42.8)
Gain on disposal of business - (36.5) (33.0)
Net finance costs 62.7 48.8 100.2
Share based charges 16 8.8 9.8 19.6
Decrease in provisions and employee benefits (33.7) (11.9) (91.0)
Dividends from joint ventures 13.7 8.0 15.6
Other exceptional items - non-cash impact 137.9 26.0 84.5
Tax charge 7 21.6 35.6 58.3
Changes in working capital (excluding effect of acquisition and divestment of
subsidiaries)
Decrease in inventories 0.4 1.9 1.5
Increase in receivables (68.1) (164.4) (77.5)
Decrease in payables (67.0) (19.3) (54.4)
Exchange movements (0.1) 2.8 3.1
Cash generated from/(used in) operations 30.5 (7.1) 146.1
Tax paid (38.4) (105.1) (97.7)
Net cash (used in)/generated from operating activities (7.9) (112.2) 48.4
Cash flows from investing activities
Disposal of businesses (net of cash disposed and tax paid) - 42.3 (22.5)
Proceeds from disposal of investment in joint ventures - - 15.9
Purchase of property plant and equipment (8.5) (9.2) (18.8)
Proceeds from sale of property plant and equipment 2.7 1.4 8.2
Purchase of intangible assets (41.8) (68.0) (126.4)
Interest received 0.8 3.6 1.1
Net cash used in investing activities (46.8) (29.9) (142.5)
Cash flows from financing activities
Repayment of short-term borrowings 15 (28.0) (105.5) (133.5)
Proceeds from long-term borrowings 15 235.5 257.0 515.0
Repayment of long-term borrowings - - (200.0)
Payment of lease liabilities 15 (55.0) (52.4) (113.3)
Proceeds from SIP shares - 0.8 1.6
Transactions with Employee Share Trust (1.6) - -
Interest paid (54.6) (44.8) (81.7)
Dividends paid to non-controlling interests (0.4) (0.8) (1.6)
Net cash generated from/(used in) financing activities 95.9 54.3 (13.5)
Net increase/(decrease) in cash and cash equivalents 15 41.2 (87.8) (107.6)
Effect of exchange rate changes on cash and cash equivalents 15 (2.8) 1.3 4.9
Opening cash and cash equivalents 434.0 536.7 536.7
Closing cash and cash equivalents 472.4 450.2 434.0
Cash at bank and in hand at 30 June 2024 includes $150.8m (December 2023:
$127.7m) that is part of the Group's cash pooling arrangements. For internal
reporting and for the purposes of the calculation of interest by the bank,
this amount is netted with short-term overdrafts. However, in preparing these
financial statements, the Group is required to gross up both its cash and
short-term borrowings figures by this amount. Movement in short-term
overdrafts are presented as part of the cash flows from financing activities
as the overdraft facilities form part of the Group's financing.
The proceeds of long-term borrowings of $235.5m includes additional borrowings
under the Revolving Credit Facility.
Payment of lease liabilities includes the cash payments for the principal
portion of lease payments of $44.8m (June 2023: $43.9m) and for the interest
portion of $10.2m (June 2023: $8.5m). The classification of interest paid
within financing activities is in line with the Group accounting policy.
The notes on pages 34 to 56 are an integral part of the interim financial
statements.
Notes to the interim financial statements
for the six month period to 30 June 2024
1. Basis of preparation
This condensed set of financial statements for the six months ended 30 June
2024 have been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted for use in the UK. The interim report and condensed consolidated
financial statements should be read in conjunction with the Group's 2023
Annual Report and Accounts which have been prepared in accordance with
UK-adopted international accounting standards and delivered to the Registrar
of Companies. The audit opinion contained within the 2023 financial statements
was unqualified.
As required by the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority, the interim report and condensed consolidated financial
statements have been prepared applying the accounting policies that were
applied in the preparation of the Group's Annual Report and Accounts for the
year ended 31 December 2023. The interim report and condensed consolidated
financial statements do not comprise statutory accounts within the meaning of
section 434 of the Companies Act 2006.
The results for the six months to 30 June 2024 and the comparative results for
the six months to 30 June 2023 are unaudited and have not been reviewed by the
auditors. The comparative figures for the year ended 31 December 2023 do not
constitute the statutory financial statements for that year.
The interim condensed financial statements were approved by the board of
directors on 19 August 2024.
Going concern
The directors have undertaken a rigorous assessment of going concern and
liquidity over a period of at least 12 months from the date of approval of
these condensed financial statements (the going concern period), which
includes financial forecasts up to the end of 2025 to reflect severe, but
plausible scenarios. The directors have considered as part of this
assessment the impact of the events that happened post balance sheet date and
up to the date of issue of these condensed financial statements.
To satisfy themselves that the Group have adequate resources for the going
concern assessment period, the directors have reviewed the Group's existing
debt levels, the forecast compliance with debt covenants, and the Group's
ability to generate cash from trading activities. As of 30 June 2024, the
Group's principal debt facilities comprise a $1,200.0m revolving credit
facility maturing in October 2026; a $200.0m term loan which matures in
October 2026 and $352.5m of US private placement debt repayable in various
tranches between July 2024 and July 2031, with around 75% due after the end of
2025. At 30 June 2024, the Group had headroom of $602.8m under its principal
debt facilities and a further $84.0m of other undrawn borrowing facilities.
The Group also expects to have sufficient levels of headroom in the severe but
plausible downside scenario modelled.
At 30 June 2024, the Group had net current liabilities of $41.9m (December
2023: $207.0m).
The directors have considered the impact of a range of scenarios on the
Group's future financial performance and cash flows. These scenarios reflect
our outlook for the energy and materials end markets. Energy includes oil and
gas and the Group forecast growth in this area underpinned by increased focus
on energy security and decarbonisation of operations. Materials includes
minerals, chemicals and life sciences which are underpinned by growing
populations and global net zero ambitions. The order book gives 92% and 31%
coverage over 2024 and 2025 revenues respectively. Further, the order book
is 83% reimbursable which results in a lower risk profile of the Group's
forecast cash flows over the going concern period.
The directors have also considered severe, but plausible, downside scenarios
which reflect material reductions in H2 2024 and 2025 revenue of 5% and 10%
and a reduction of 0.5% and 1% in gross margin percentage from the base, board
approved, scenario respectively. The directors have concluded that there are
adequate levels of contingency in the base forecasts and given that backlog
covers 92% and 31% of 2024 and 2025 revenues respectively, the downside
scenario modelled was considered severe, but plausible. Material reductions in
revenue from the base forecast could arise from a worsening economic climate,
potentially leading to unexpected deferrals or cancellations of contracts by
our clients. A number of mitigations are available to management to offset
any reductions in profitability against the forecast, including material
reductions in discretionary bonus awards.
In each of the scenarios modelled, the financial covenants were passed with
facility headroom remaining available. The directors included the impact of
the removal of the receivables financing facilities (which are not committed)
of $200m in the base scenario and the impact of additional adverse movements
in working capital as additional, more severe, downside scenarios. The
Group still had sufficient headroom to meet its liabilities as they fall due
with these additional sensitivities.
Consequently, the directors are confident that the Group and company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of the financial statements and
therefore have prepared the financial statements on a going concern basis.
Significant accounting policies
The Group's significant accounting policies adopted in the preparation of
these financial statements are set out in the Group's 2023 Annual Report.
Updates since the 2023 Annual Report are noted below. These policies have been
consistently applied to all the periods presented.
Judgements and Estimates
In preparing these interim condensed financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty are the same as those applied to the
consolidated financial statements for the year ended 31 December 2023.
Functional currency
The Group's earnings stream is primarily US dollars and the principal
functional currency is the US dollar, being the most representative currency
of the Group. The Group's financial statements are therefore prepared in US
dollars.
The following exchange rates have been used in the preparation of these
accounts:
June 2024 June 2023 December 2023
Average rate £1 = $ 1.2649 1.2327 1.2425
Closing rate £1 = $ 1.2641 1.2713 1.2749
Disclosure of impact of new and future accounting standards
No new standards became effective in the period.
2. Segmental reporting
The Group monitors activity and performance through four operating segments;
Projects, Operations, Consulting and Investment Services ('IVS') plus the
legacy Built Environment Consulting segment (divested in September 2022).
Under IFRS 11 'Joint arrangements', the Group is required to account for joint
ventures using equity accounting. Adjusted EBITDA as shown in the table
below includes our share of joint venture profits and excludes exceptional
items, which is consistent with the way management review the performance of
the business units. Joint venture results are reported on an equity accounting
basis and therefore revenue figures exclude joint venture revenue.
The segment information provided to the Group's Chief Executive for the
reportable operating segments for the period included the following:
Reportable operating segments
Revenue Adjusted EBITDA ((1)) Operating profit
Unaudited Unaudited Interim June (re-presented) 2023 $m Audited Unaudited Interim June 2024 Unaudited Interim June (re-presented) 2023 $m Audited Unaudited Interim June 2024 $m Unaudited Audited
Interim Full Year (re-presented) 2023 $m $m Full Year (re-presented) 2023 $m Interim Full
June June Year
2024 (re-presented) (re-presented)
$m 2023 2023
$m $m
Projects 1,084.3 1,239.0 2,401.2 95.7 93.4 177.2 (922.2) 13.2 11.2
Operations 1,301.9 1,206.4 2,412.2 90.7 80.3 172.2 53.4 36.9 95.0
Consulting 342.0 343.8 717.1 39.3 39.6 81.5 25.8 25.2 52.4
Built Environment Consulting (discontinued) - - - - - (10.2) - - (15.2)
Investment Services 115.8 197.0 370.2 23.6 19.3 68.1 4.0 1.4 14.0
Central costs ((2)) - - - (30.6) (30.9) (76.3) (60.0) (53.9) (135.1)
Total Group 2,844.0 2,986.2 5,900.7 218.7 201.7 412.5 (899.0) 22.8 22.3
Elimination of discontinued operation - - - - - 10.2 - - 15.2
Total (continuing operations) 2,844.0 2,986.2 5,900.7 218.7 201.7 422.7 (899.0) 22.8 37.5
Finance income 7.9 13.3 19.4
Finance expense (70.6) (62.1) (119.6)
Loss before taxation from continuing operations (961.7) (26.0) (62.7)
Taxation (21.6) (30.4) (65.0)
Loss for the period from continuing operations (983.3) (56.4) (127.7)
Profit from discontinued operation, net of tax - 29.4 22.5
Loss for the period (983.3) (27.0) (105.2)
Notes
1. A reconciliation of operating profit/(loss) to Adjusted EBITDA is
provided in the table below. Adjusted EBITDA is provided as it is a unit of
measurement used by the Group in the management of its business. Adjusted
EBITDA is stated before exceptional items (see note 4).
2. Central includes the costs of certain Group management personnel,
along with an element of Group infrastructure costs.
3. Revenue arising from sales between segments is not material.
4. Revenue excludes exceptional items of $24.0m (June 2023: $nil)
5. The comparative periods have been re-presented due to transfers of
business groups between the four operating segments on 1 January 2024.
Reconciliation of Alternative Performance Measures
Unaudited Unaudited Audited
Interim
Interim
Full Year
June 2024 June 2023
December 2023
$m $m $m
Operating (loss)/profit per income statement (899.0) 22.8 37.5
Share of joint venture finance expense and tax 9.0 8.3 16.3
Exceptional items (note 4) 965.8 31.1 76.7
Amortisation (including joint ventures) 84.5 79.2 161.1
Depreciation (including joint ventures) 13.9 15.1 26.2
Depreciation of right of use assets (including joint ventures) 44.5 44.8 103.1
Impairment of joint venture investments and PP&E - 0.4 1.8
Adjusted EBITDA (continuing operations) 218.7 201.7 422.7
Discontinued operation
Operating profit (discontinued) - - (15.2)
Exceptional items - - 5.0
Adjusted EBITDA (discontinued operation) - - (10.2)
Total Group Adjusted EBITDA 218.7 201.7 412.5
Depreciation in respect of joint ventures totals $3.5m (June 2023: $1.5m),
depreciation in respect of joint venture right of use assets totals $3.5m
(June 2023: $3.9m) and joint venture amortisation amounts to $0.9m (June 2023:
$0.7m).
Analysis of joint venture profits by segment Adjusted EBITDA Operating profit
Unaudited Unaudited Audited Unaudited Unaudited Audited
Interim Interim Full Interim Interim Full
June June Year June June Year
2024 2023 2023 2024 2023 2023
$m $m $m $m $m $m
Projects 1.0 1.8 3.4 0.8 1.6 3.1
Operations 6.0 6.2 13.0 5.4 5.4 11.3
Investment Services 22.3 20.8 57.2 15.2 15.7 44.7
Total 29.3 28.8 73.6 21.4 22.7 59.1
3. Revenue
In the following table, revenue is disaggregated by primary geographical
market and major service line. The tables provided below analyses total
revenue excluding our share of joint venture revenue and exceptional items of
$24.0m (June 2023: $nil).
Projects Projects Operations Operations Consulting Consulting IVS IVS Total Total
Primary geographical market Unaudited Interim June 2024 Unaudited Interim June 2023 (re-presented) Unaudited Interim June 2024 Unaudited Interim Unaudited Interim June 2024 Unaudited Interim Unaudited Interim Unaudited Interim June 2023 (re-presented) Unaudited Interim June 2024 Unaudited Interim
June 2023 (re-presented) June 2023 (re-presented) June 2024 June 2023
$m $m $m $m $m $m $m $m $m $m
US 291.4 292.8 166.6 150.9 145.4 138.1 89.0 177.8 692.4 759.6
Europe 202.1 199.8 466.5 425.7 94.4 80.6 26.8 19.2 789.8 725.3
Rest of the world 590.8 746.4 668.8 629.8 102.2 125.1 - - 1,361.8 1,501.3
Revenue 1,084.3 1,239.0 1,301.9 1,206.4 342.0 343.8 115.8 197.0 2,844.0 2,986.2
Major service lines
Energy
Oil & Gas 450.7 423.4 1,114.0 1,050.5 185.4 176.6 2.2 16.0 1,752.3 1,666.5
Power, Renewables, Hydrogen and Carbon Capture 65.4 57.2 47.1 88.3 76.9 45.9 34.6 20.6 224.0 212.0
Materials
Refining & Chemicals 411.7 467.6 119.3 48.2 29.3 44.0 20.2 60.7 580.5 620.5
Minerals, Processing and Life Sciences 129.2 200.3 8.4 10.1 1.5 3.6 - 15.5 139.1 229.5
Other
Built Environment - 3.6 7.1 6.7 - 26.2 58.8 67.8 65.9 104.3
Industrial Processes and other 27.3 86.9 6.0 2.6 48.9 47.5 - 16.4 82.2
153.4
Revenue 1,084.3 1,239.0 1,301.9 1,206.4 342.0 343.8 115.8 197.0 2,844.0 2,986.2
Sustainable solutions 264.4 343.5 197.2 162.3 100.5 74.4 34.6 20.6 596.7 600.8
The Group's revenue is largely derived from the provision of services over
time.
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, decarbonisation in oil & gas, refining & chemicals, minerals
processing and other industrial processes. In the case of mixed scopes
including a decarbonisation element, these are only included in sustainable
solutions if 75% or more of the scope relates to that element, in which case
the total revenue is recorded in sustainable solutions.
For the 6 months to 30 June 2024, 80% (June 2023: 78%) of the Group's total
revenue came from reimbursable contracts and 20% (June 2023: 22%) from lump
sum contracts. The calculation of revenue from lump sum contracts is based on
estimates and the amount recognised could increase or decrease.
Contract balances
The following table provides a summary of receivables, contract assets and
liabilities arising from the Group's contracts with customers:
Unaudited Unaudited Audited
Interim Interim Full Year
June 2024 June 2023 December 2023
$m $m $m
Trade receivables 674.2 754.7 729.5
Non-current contract assets 172.4 121.2 153.7
Gross amounts due from customers 562.0 593.0 522.9
Gross amounts due to customers (129.4) (136.6) (99.0)
1,279.2 1,332.3 1,307.1
The contract balances include amounts the Group has invoiced to customers
(trade receivables) as well as amounts where the Group has the right to
receive consideration for work completed which has not been billed at the
reporting date (gross amounts due from customers). Gross amounts due from
customers are transferred to trade receivables when the rights become
unconditional which usually occurs when the customer is invoiced. Gross
amounts due to customers primarily relates to advance consideration received
from customers, for which revenue is recognised over time.
Trade receivables reduced by $55.3m since December 2023 and this is primarily
due to reduced activity levels during the first half of 2024, partially offset
by the impact of higher closing DSO. Gross amounts due from customers has
increased by $39.1m to $562.0m. The increase is largely explained by the
increase in higher average DSO during the period.
Non-current contract assets of $172.4m (December 2023: $153.7m) includes
$83.9m of gross amounts due from customers and $15.9m of trade receivables,
both of which are in relation to the Aegis contract. The increase in the
non-current contract assets is mainly as a result of reclassifications from
current to non-current and the Aegis contract completion in 2023. The Group
has classified certain receivable balances, including Aegis as non-current due
to the element of uncertainty surrounding the timing of receipt of these
balances. Provisions held in relation to Aegis are not material.
Trade receivables and gross amounts due from customers are included within the
'Trade and other receivables' heading in the Group balance sheet. Gross
amounts due to customers and deferred income is included within the 'Trade and
other payables' heading in the Group balance sheet.
Revenue recognised in 2024 which was included in gross amounts due to
customers and deferred income at the beginning of the year of $66.5m
represents amounts included within contract liabilities at 1 January 2024.
Revenue recognised from performance obligations satisfied in previous periods
of $4.4m (June 2023: $5.6m) represents revenue recognised in 2023 for
performance obligations which were considered operationally complete at 31
December 2023.
As at 30 June 2024, the Group had received $197.2m (June 2023: $200.0m) of
cash relating to non-recourse financing arrangements with its banks. An
equivalent amount of trade receivables was derecognised on receipt of the
cash.
Aegis Poland
This legacy AFW project involved the construction of various buildings to
house the Aegis Ashore anti-missile defence facility for the United States
Army Corps of Engineers ("USACE"). Wood's construction scope is
now complete and the facilities were formally handed over to USACE in
July 2023. The corresponding warranty period for facilities ended at
various points through July 2024. There has been no change in
management's assessment of the loss at completion which remains at $222m. The
full amount of this loss has been recognised to date. The Group's
assessment of the ultimate loss includes change orders which have not been
approved by the customer. As at 31 December 2023, $186m of certified
claims had been submitted to our client, and we continue to progress further
claims which could be material. The revenue recognised is estimated
based on the amount that is deemed to be highly probable to be recovered.
That estimation is made considering the risks and likelihood of recovery of
change orders. The Group's assessment of liquidated damages also involves an
expectation of relief from possible obligations linked to delays on the
contract. These liquidated damages and relief assumptions are estimates
prepared in conjunction with the change orders estimates noted
above. Disclosure of the value of liquidated damages included in the loss
at completion is not disclosed as the directors believe that this would be
seriously prejudicial while commercial settlement negotiations are
ongoing. The range of possible outcomes in respect to the change orders
that are highly likely to be recoverable and the liquidated damages for which
a relief will be obtained is material. The Group has classified the receivable
balances as non-current, due to the element of uncertainty surrounding the
timing of the receipt of these balances. The ultimate loss also includes the
Group's assessment of the total legal costs necessary to achieve recovery of
the amounts believed to be recoverable and defend our position on liquidated
damages. At this point in time this is an estimate based on a weighted average
of several possible outcomes and the actual costs could be materially higher
or lower depending on actual route to settlement. If the amounts agreed are
different to the assumptions made, then the ultimate loss could be materially
different. In reaching its assessment of this loss, management have made
certain estimates and assumptions relating to the date of completion and
recovery of costs from USACE. If the actual outcome differs from these
estimates and assumptions, the ultimate loss will be different.
Transaction price allocated to the remaining performance obligations
The transaction price allocated to the remaining performance obligations
(unsatisfied or partially unsatisfied) as at 30 June 2024 was as follows:
$m
Year 1 Year 2 Year 3 Total
Revenue 2,541.4 2,028.9 1,468.6 6,038.9
The Group has not adopted the practical expedients permitted by IFRS 15,
therefore all contracts which have an original expected duration of one year
or less have been included in the table above. The estimate of the transaction
price represents contractually agreed backlog and does not include any amounts
of variable consideration which are constrained. The Group continues to move
into a reimbursable contract model, moving away from and no longer bidding for
lump sum turnkey ("LSTK") contracts which are inherently riskier. 85% of
future performance obligations relate to reimbursable contracts and the
remainder to fixed price.
4. 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.
Unaudited Unaudited Audited
Interim
Interim
Full Year
June 2024 June 2023
December 2023
$m $m $m
Redundancy and restructuring costs 12.1 - -
LSTK and large-scale EPC 140.0 21.2 45.1
Impairment of goodwill 815.0 - -
Takeover related costs 5.5 4.6 4.8
Investigation support costs and provisions - - (2.6)
Asbestos yield curve and costs (6.8) 5.3 29.4
Exceptional items included in continuing operations, before interest and tax 965.8 31.1 76.7
Unwinding of discount on asbestos provision 4.4 5.5 11.1
Tax credit in relation to exceptional items (0.8) (5.2) (0.2)
Release of uncertain tax provision - (7.4) (7.4)
Derecognition of deferred tax assets due to UK pension actuarial movements 7.6 17.2 18.0
Exceptional items included in continuing operations, net of interest and tax 977.0 41.2 98.2
Redundancy and restructuring costs
The Group announced the Simplification programme in March 2024 which was set
out to help the Group deliver higher margins while remaining focused on
business growth. This programme led to a reduction in the number of central
functional roles by placing greater ownership and accountability for
functional activities into the business units. As of 30 June 2024, this
phase of work was largely complete. The subsequent phases of the
simplification programme aims to deliver IT savings, save property costs and
reduce complexity in the Group's functional structure. We will also expand
our shared services model. These phases will be largely complete by the
first half of 2025.
The costs incurred in relation to Simplification amount to $12.1m and
primarily relate to costs associated with the headcount reductions in the
central functions. The total cost of Simplification is around $70m, with
around $50m of costs expected to be incurred in 2024 and the balance in
2025. The majority of these remaining costs relate to the exit of certain IT
contracts; the notice to terminate was served in July 2024 and therefore does
not meet the criteria for recognition in the interim financial statements.
LSTK and large-scale EPC
The Group made a strategic decision in 2022 to exit certain business
segments and following that decision, we ceased to operate in the
large-scale EPC or lump sum turnkey ("LSTK") business segment. In recent
years, the Group has wound down the remaining contracts, however we continue
to have a significant balance sheet position and claims exposure across some
legacy contracts. The closure of these businesses has reduced our leverage
to negotiate commercial close outs and the staff involved have now all been
exited from the business, making claims recovery or defence of litigation
considerably more challenging. Accordingly, the Group has carried out
a detailed review of the contract positions, including an assessment of the
current material exposures and risks on remaining LSTK and large-scale EPC
contracts; an assessment of the recoverability of outstanding receivables
balances; a review of the Projects risk register and legal watch lists of all
material cases. This review was conducted by the appropriate levels of
senior management within the Group and business units.
Following this review, an exceptional charge of $140m was taken to the income
statement and is composed of $53m of provisions against trade and other
receivables, $61m of provisions for additional claims and $26m of final
settlements. These charges were recorded within exceptional items by virtue
of their size and nature. The provisions of $53m recorded against trade and
other receivables have been taken in the first half of 2024 following
engagement with certain of our clients in the EPC business where the
clients are disputing the settlement of the receivables. The additional
claims provision represents managements best estimate to close out the
remaining claims within the LSTK and large-scale EPC business. The final
settlement charge represents the additional cost to close out a series of
solar EPC contracts on which we negotiated a full and final settlement
agreement with the client.
Impairment of goodwill
The impairment charge recognised against goodwill amounts to $815.0m and is
recorded within exceptional items by virtue of its size and nature. The
impairment charge was triggered by higher discount rates and an increase is
the risk factors applied to the value in use model, to reflect more closely
market observed multiples. The higher discount rates are driven by market
volatility and increases to the cost of debt. The directors have observed
that the market capitalisation of the Group has remained low for several years
and the levels of goodwill that arose mostly from large historical
acquisitions were no longer supported by the expected future cash flows.
Takeover related costs
During the period, Dar Al-Handasah Consultants Shair and Partners Holdings
Limited ("Sidara") made four unsolicited proposals to acquire Wood. On 5
August 2024, after an extended period of detailed engagement, Sidara announced
that it did not intend to make an offer for Wood in light of rising
geopolitical risks and financial market uncertainty.
We incurred $5.5m of costs related to these proposals in the period to 30 June
2024. The cash costs in the second half are expected to be around $5m,
taking the total expected gross cost to be around $11m. This total expected
gross cost will be partially reimbursed by Sidara under an agreement for
external costs coverage.
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 outside the Group's control. Excluding these
amounts from the trading results improves the understandability of the
underlying trading performance of the Group.
The $6.8m credit (June 2023: charge $5.3m) principally comprises a $8.2m yield
curve credit (June 2023: charge $2.0m) and charges of $1.4m (June 2023: $3.3m)
of costs in relation to managing the claims. The yield curve credit
recognised in 2024 is principally due to an increase in the 27-year blended
yield curve rate to 4.6% (Dec 2023: 3.64%).
In addition, $4.4m of interest costs which relate to the unwinding of discount
on the asbestos provision are shown as exceptional (June 2023: $5.5m).
Tax
An exceptional tax charge of $6.8 million (June 2023: $4.6 million) has been
recorded during the period. It consists of a $0.8 million tax credit on
exceptional items (June 2023: $5.2 million), no movement in relation to
uncertain tax provisions, offset by an exceptional charge of $7.6 million
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 $7.6 million of deferred tax assets has
been charged through exceptional items consistent with the treatment in prior
periods.
5. Dividends
Our capital allocation policy remains unchanged and starts with having a
strong balance sheet. We look to manage our target leverage over the medium
term within a range of around 0.5 to 1.5 times net debt (excluding leases) to
adjusted EBITDA (pre-IFRS 16). Beyond this, we will consider how best to
create value for our shareholders from dividends, share buybacks or attractive
acquisitions.
6. Earnings per share
Unaudited Interim Unaudited Interim Audited Full Year
June 2024 June 2023 December 2023
(Losses)/ (Losses)/ (Losses)/
earnings attributable Number earnings attributable earnings attributable
to equity shareholders of shares Earnings to equity shareholders Number of shares Earnings to equity shareholders Number of shares (millions) Earnings
($m) (millions) per share ($m) (millions) per share ($m) per share
(cents) (cents) (cents)
Basic pre-exceptional (7.7) 689.3 (1.1) (17.5) 684.9 (2.6) (45.2) 685.9 (6.6)
Exceptional items, net of tax (977.0) - (141.7) (11.8) - (1.7) (65.5) - (9.5)
Basic (984.7) 689.3 (142.9) (29.3) 684.9 (4.3) (110.7) 685.9 (16.1)
Effect of dilutive ordinary shares - - - - - - - - -
Diluted (984.7) 689.3 (142.9) (29.3) 684.9 (4.3) (110.7) 685.9 (16.1)
Adjusted diluted earnings per share calculation
Basic (984.7) 689.3 (142.9) (29.3) 684.9 (4.3) (110.7) 685.9 (16.1)
Effect of dilutive ordinary shares - - - - - - - - -
Diluted (984.7) 689.3 (142.9) (29.3) 684.9 (4.3) (110.7) 685.9 (16.1)
Exceptional items, net of tax 977.0 - 141.7 11.8 - 1.8 65.5 - 9.5
Amortisation of intangibles on acquisition, net of tax 24.6 - 3.6 24.7 - 3.6 50.8 - 7.4
Adjusted diluted 16.9 689.3 2.5 7.2 684.9 1.1 5.6 685.9 0.8
Adjusted basic 16.9 689.3 2.5 7.2 684.9 1.1 5.6 685.9 0.8
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 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. The Group's dilutive ordinary shares comprise share options granted
to employees under Executive Share Option Schemes, shares and share options
awarded under the Group's Long-Term Plan and shares awarded under the Group's
Employee Share Plan and Share Incentive Plan. Adjusted basic and adjusted
diluted earnings per share are disclosed to show the results excluding the
impact of exceptional items and amortisation related to acquisitions, net of
tax.
For the period ended 30 June 2024, the Group reported a basic loss (December
2023: loss) per ordinary share, therefore the effect of dilutive ordinary
shares are excluded (December 2023: excluded) in the calculation of diluted
earnings per share. Had the result been a profit, an additional 26.1m of
dilutive potential shares would have been used in the calculation of diluted
EPS metrics, which would have reduced the adjusted diluted loss per share by
0.1 cents.
7. Taxation
Reconciliation of applicable tax charge at statutory rates to tax charge Audited
Unaudited Interim Unaudited Full Year
June 2024 Interim December
$m June 2023 2023
$m $m
Loss before taxation from continuing operations (961.7) (26.0) (62.7)
Loss before taxation from discontinued operations - - (15.2)
Gain on sale of discontinued operation - 34.6 31.0
Less: Share of post-tax profit from joint ventures (12.4) (14.4) (42.8)
Loss before taxation from total operations (excluding profits from joint (974.1) (5.8) (89.7)
ventures)
Applicable tax charge at statutory rates (240.8) 2.1 (1.4)
Effects of:
Non-deductible expenses 4.4 2.4 18.7
Non-taxable income - (0.4) -
Non-deductible expenses - exceptional 204.7 - 4.1
Non-taxable income - exceptional - 0.3 (9.9)
Deferred tax recognition:
Recognition of deferred tax assets not previously recognised (0.4) (0.7) (5.5)
Utilisation of tax assets not previously recognised (8.4) (2.1) (3.4)
Current year deferred tax assets not recognised 42.6 17.9 62.0
Write off of previously recognised deferred tax assets 5.1 - 2.2
Derecognition due to UK pension actuarial movements 7.6 17.2 18.0
Irrecoverable withholding tax 4.1 6.5 14.3
CFC charges 1.3 1.1 5.7
Uncertain tax provisions - (0.5) (0.4)
Uncertain tax provisions - exceptional (0.1) - 0.6
Uncertain tax provisions prior year adjustments (0.2) (0.7) (10.6)
Uncertain tax provisions prior year adjustments - exceptional - (7.4) (7.4)
Prior year adjustments 0.1 (0.9) (14.4)
Prior year adjustments - exceptional - - (11.2)
Impact of change in rates on deferred tax 0.8 0.8 (3.1)
Pillar II charge 0.8 - -
Total tax charge 21.6 35.6 58.3
Comprising
Tax charge on continuing operations:
Pillar II tax charge 0.8 - -
Corporation tax charge 20.8 30.4 65.0
Tax charge/(credit) on discontinued operations - 5.2 (6.7)
Total tax charge 21.6 35.6 58.3
Factors affecting the current tax charge
The weighted average of statutory tax rates is 24.7% in 2024. This represents
the profits and losses by jurisdiction at the tax rate applicable for the
jurisdiction. Non-deductible expenses - exceptional primarily relates to
goodwill impairment. Of the current year deferred tax assets not recognised,
$37.2m relates to exceptional items predominately relating to the LSTK and
large-scale EPC losses as described in note 4.
The actuarial loss in relation to the UK defined benefit pension scheme has
resulted in a decrease in deferred tax liabilities of $7.6m through Other
Comprehensive Income. As deferred tax liabilities support the recognition of
deferred tax assets, a reduction of $7.6m of deferred tax asset recognition
has been recognised through exceptional items in the Income Statement. A
charge of $18.0m (June 2023: $17.2m) of the same nature was included within
exceptional items in 2023.
Due to forecast profits in the UK deferred tax assets previously not
recognised are forecast to be utilised in 2024. The impact on the half year
results is a reduction in the tax charge of $8.4m.
There have been no material movements in the facts and circumstances relating
to uncertain tax positions during the period, as a result there is no change
in our judgement in relation to the calculation of the level of provision
required.
Pillar II
The Group is within the scope of the OECD Pillar Two model rules. John Wood
Group plc is incorporated and tax resident in the UK, as a result the rules
apply following the UK implementation from 1 January 2024.
A tax charge of $0.8m is estimated for the first half of 2024 primarily
reflecting profits of the Groups Guernsey incorporated captive insurance
company. There is uncertainty over the treatment of UK losses used against
profits of the captive insurance company to the extent they are attributable
to the Guernsey permanent establishment of the entity, and whether the loss
utilisation counts as a tax charge for the permanent establishment. When there
is clarity in relation to the technical uncertainty, the Pillar Two charge may
reduce reflecting none of the profits of the captive insurance company are
subject to the charge.
Factors affecting future tax charges
There are a number of factors that may affect the Group's future tax charge
including the resolution of open issues with the tax authorities, corporate
acquisitions and disposals, the use of brought forward losses and changes in
tax legislation and rates. The following outlines key factors that may impact
on future tax charges.
The forecast tax charge includes a credit for the utilisation of unrecognised
deferred tax assets related to the UK. If the geographic split of actual
profits for the year differs from the forecast this will impact on the
utilisation of unrecognised assets and impact on the tax charge. The actual
geographical split and forecasts for future years will also impact on whether
or not further deferred tax assets may be recognised.
Actuarial valuations of the UK defined benefit pension scheme create
volatility in the tax charge due to revaluations of the net pension asset
impacting on the related deferred tax liability. This is because the movement
in the deferred tax liability in respect of the pension surplus is taken to
Other Comprehensive Income whilst the corresponding movement in deferred tax
asset recognition is taken to the income statement.
8. Retirement benefit obligations
The Group operates a number of defined benefit pension schemes which are
largely closed to future accrual. The surplus or deficit recognised in respect
of each scheme represents the difference between the present value of the
defined benefit obligations and the fair value of the scheme assets. The
assets of these schemes are held in separate trustee administered funds. As at
30 June 2024, 98.6% (December 2023: 108.2%) of total scheme assets in the
principal schemes have quoted prices in active markets.
At 30 June 2024, the largest schemes were the Wood Pension Plan ('WPP'), the
Foster Wheeler Inc Salaried Employees Pension Plan ('FW Inc SEPP') and the
Foster Wheeler Inc Pension Plan for Certain Employees ('FW Inc PPCE'). An
interim revaluation of these schemes has been carried out at 30 June 2024 and
the related actuarial losses of $24.8m (June 2023: $65.5m) are recorded in the
Group statement of comprehensive income. The losses are largely as result of a
reduction in the market value of assets outweighing the increase in the
discount rate in the period. The discount rate is outlined in the table below.
The discount rate is determined by the scheme actuaries and reflects the
return on high quality corporate bonds. An increase in the discount rate will
decrease the defined benefit obligation.
The latest triennial valuation of the WPP was approved by the Company and the
Trustees in June 2024. As the plan was in surplus no recovery plan or
deficit reduction contributions are required.
In June 2023, the High Court handed down a decision in the case of Virgin
Media Limited v NTL Pension Trustees II Limited and others relating to the
validity of certain historical pension changes due to the lack of actuarial
confirmation required by law. In July 2024, the Court of Appeal dismissed
the appeal brought by Virgin Media Ltd against aspects of the June 2023
decision. The conclusions reached by the court in this case may have
implications for other UK defined benefit plans. The Company and pension
trustees are currently considering the implications of the case for the Wood
Pension Plan. The defined benefit obligation has been calculated on the
basis of the pension benefits currently being administered, and at this stage
the directors do not consider it necessary to make any adjustments as a result
of the Virgin Media case.
The principal assumptions used in calculating the Group's defined benefit
pension schemes are as follows:
June June June June 2023 June 2023 June 2023 December 2023 December 2023 December
2024 2024 2024 FW Inc SEPP FW Inc PPCE FW Inc SEPP 2023
FW Inc SEPP FW Inc PPCE FW Inc PPCE
Wood Pension Plan Wood Pension Plan Wood Pension Plan
% % % % % % % % %
Discount rate 5.3 5.4 5.4 5.3 5.1 5.1 4.8 4.9 4.9
Rate of retail price index inflation 3.1 N/A N/A 3.2 N/A N/A 3.0 N/A N/A
Rate of consumer price index inflation 2.8 N/A N/A 2.7 N/A N/A 2.6 N/A N/A
The assumptions on the FW Inc SEPP and FW Inc PPCE in the above table are not
applicable since there are no post-retirement increases or cost of living
adjustments provided in these plans. With no cost of living adjustments, there
are no underlying retail price index or consumer price index assumptions to
consider.
Sensitivity to discount rate and inflation rate
The impact of changes to the key assumptions on the retirement benefit
obligation is shown below. The sensitivity is based on a change in an
assumption whilst holding all other assumptions constant. In practice, this is
unlikely to occur, and changes in some of the assumptions may be correlated.
When calculating the sensitivity of the defined benefit obligation to
significant actuarial assumptions, the same method has been applied as when
calculating the pension obligation recognised in the Group balance sheet.
June 2024 June 2024 June 2024 June 2023 June 2023 June 2023 December 2023 December 2023 December 2023
Wood FW FW Wood FW FW Wood FW FW
Pension Inc Inc Pension Inc Inc Pension Inc Inc
Plan SEPP PPCE Plan SEPP PPCE Plan SEPP PPCE
$m $m $m $m $m $m $m $m $m
Discount rate
Plus 0.5% (129.1) (2.9) (4.8) (129.6) (3.3) (5.4) (146.6) (3.2) (5.2)
Minus 0.5% 142.8 3.1 5.1 143.9 3.5 5.7 163.0 3.5 5.6
Inflation
Plus 0.1% 13.1 N/A N/A 13.3 N/A N/A 15.0 N/A N/A
Minus 0.1% (13.0) N/A N/A (13.3) N/A N/A (14.9) N/A N/A
9. Other non-current liabilities
Unaudited Unaudited Audited
Interim
Interim
Full Year
June 2024 June 2023
December 2023
$m $m $m
Other payables 88.7 73.5 69.4
Other non-current liabilities 88.7 73.5 69.4
Other payables mainly relate to the US SERP pension arrangement and amount to
$52.4m (December 2023: $51.3m).
10. Goodwill and other intangible assets
Software and development costs Customer contracts and relationships Order Brands Total
backlog
Goodwill
$m $m $m $m $m $m
Cost
At 1 January 2024 4,311.8 496.2 660.9 158.2 484.8 6,111.9
Exchange movements (32.6) (5.4) (4.0) (0.9) (3.3) (46.2)
Additions - 59.5 - - - 59.5
Disposals - (5.3) - - - (5.3)
At 30 June 2024 4,279.2 545.0 656.9 157.3 481.5 6,119.9
Amortisation and impairment
At 1 January 2024 495.3 361.5 576.8 158.2 201.1 1,792.9
Exchange movements (2.6) (4.7) (3.3) (0.9) (1.1) (12.6)
Impairment charge 815.0 - - - - 815.0
Amortisation charge - 57.3 12.2 - 14.1 83.6
Disposals - (5.3) - - - (5.3)
At 30 June 2024 1,307.7 408.8 585.7 157.3 214.1 2,673.6
Net book value at 30 June 2024 2,971.5 136.2 71.2 - 267.4 3,446.3
Software and development costs Customer contracts and relationships Order Brands Total
backlog
Goodwill
$m $m $m $m $m $m
Cost
At 1 January 2023 4,277.4 343.2 656.1 157.0 479.4 5,913.1
Exchange movements 35.3 22.5 2.6 1.0 4.5 65.9
Additions - 100.6 - - - 100.6
Disposals (15.0) (1.0) - - - (16.0)
At 30 June 2023 4,297.7 465.3 658.7 158.0 483.9 6,063.6
Amortisation and impairment
At 1 January 2023 488.8 239.4 547.7 157.0 171.1 1,604.0
Exchange movements 5.3 16.8 0.9 1.0 1.4 25.4
Amortisation charge - 51.3 13.1 - 14.1 78.5
Disposals - (1.0) - - - (1.0)
At 30 June 2023 494.1 306.5 561.7 158.0 186.6 1,706.9
Net book value at 30 June 2023 3,803.6 158.8 97.0 - 297.3 4,356.7
General
In accordance with IAS 36 'Impairment of assets', goodwill and other
non-current assets were reviewed for indicators of impairment at 30 June 2024.
The Group has five CGUs and Goodwill is monitored by management at CGU
level. The impairment testing that was performed as at 31 December 2023
highlighted that a reasonable change in the critical assumptions would have
resulted in an impairment for the Projects CGU as well as the overall Group
test. The critical assumptions used in the impairment model for Projects and
Group were discount rate, long term growth rate and revenue growth.
Following the review for indicators of impairment the directors noted that
increases to the discount rate and the continued low market capitalisation of
the Group were indicators of impairment for the Projects CGU and the Group.
No indicators of impairment were identified for the other CGUs given the large
amounts of headroom noted at 31 December 2023 and reasonable possible changes
in the critical assumptions did not result in an impairment.
Basis for determining recoverable amount
The recoverable amount at the year-end was determined by preparing
value-in-use calculations prepared for each CGU using the cash flow
projections included in the financial forecasts prepared by management and
approved by the Board for the period 2024 through to 2028. During the first
half of 2024, the Group completed the mid-year forecast ("MYF") update. The
MYF highlighted a slight reduction in
revenue for the Group, primarily driven by softness in the Metals and Minerals
business. EBITDA remains broadly in line, due to the expected and already
delivered full year benefits of Simplification.
The key market drivers, within energy, include energy security and supporting
energy transition in our focus markets. Our materials growth drivers are
also underpinned by transition to net zero, as well as increased consumer
demand driven by population growth and higher standards of living. The
projected growth in the Projects CGU is underpinned by the Group's strategy to
fully capitalise on our engineering capabilities to help our clients move to
net zero through energy transition and decarbonisation. The Group have also
considered that there are risks associated with energy transition, including
energy transition and industrial decarbonisation markets not generating
sufficient revenues to meet targets, which may also impact the Group's ability
to attract or retain the appropriately skilled workforce which could prevent
the Group from competing for work in this space. However, offsetting this
risk is the large near-term addressable market focused on energy security
within oil and gas along with the desire of those clients to pursue net-zero
and decarbonization efforts. These projects are supporting the energy
security agenda as major economies aim to reduce their dependency on Russian
oil and gas, whilst also ensuring affordable energy for consumers.
Critical assumptions
During the first half of 2024 the Group has observed that the market
capitalisation of the Group remained low and the goodwill balance, which
primarily related to historic acquisitions, was no longer supported by the
level of profitability in the business, particularly within the Projects
CGU. Adjustments were made to risk adjust the value-in-use calculations
for the Projects CGU and better reflect external peer multiples. Following
these risk adjustments taken, the risk adjusted CAGR for the Group was reduced
to 8.8% (December 2023: 9.7%).
The Projects revenue CAGR includes growth from its Middle East region, process
and chemicals, minerals and processing and life sciences. Projects is expected
to leverage from its existing engineering capabilities and client
relationships to grow its market share in the minerals sectors and life
sciences sectors, whilst population growth is expected to underpin growth in
the process and chemicals sector. The Projects Middle East business is
underpinned by the Group's deep history in that region.
During the year, there was a change in approach to allocating intangible
capital expenditure that is incurred centrally to each of the CGUs. The
annual amortisation charge was previously allocated to each of the CGUs on the
basis of headcount however following a review of the financial performance of
each of the CGUs and the Group as a whole, the amortisation charge is now
allocated according to usage of the various software packages and that this
change should drive improved recovery of these costs. This has no impact on
the Group position but reduces the Projects CGU value in use, increasing
Operations and Consulting.
The terminal growth rates assumed from 2028 do not exceed the long-term
average historical growth rates for the regions and sectors in which the CGUs
operate. The Group is well placed to benefit from the significant long-term
growth opportunities from Energy Transition, which has been considered in
determining long-term growth rates. Management reviewed independent
forecasts which set out the long-term investment required in order to achieve
net zero. This long-term annual growth was then applied to each of the CGUs
based on current activity levels. Accordingly, the long-term growth rates
assumed in the model are 2.1% for Projects (2023: 2.4%), with the reduction in
the long-term growth rates reflecting reducing levels of inflation.
The cash flows have been discounted using discount rates appropriate for each
CGU, and these rates are reviewed for each impairment review performed. The
discount rate is a critical assumption in the impairment test and the
significant volatility in financial markets has led to an increase in the
discount rate. The Group have considered the additional specific risks related
to each business such as country risk and forecasting risk. The Group have
considered the ongoing conflict in Israel on its operations in the Middle East
as part of its assessment of country risk premium. The discount rates
have increased since the year end reflecting the market volatility and the
market capitalisation of the Group. The Projects post tax discount rate was
increased to 11.3% (2023: 10.3%) and the pre-tax discount rate was increased
to 13.94% (2023: 12.3%). The Group post tax discount rate was increased to
10.7% (2023: 9.6%) and the pre-tax discount rate was increased to 12.9% (2023:
11.2%).
Impairment test
The carrying value of goodwill for the Projects business at 30 June 2024 was
$2,285.0m (December 2023: $2,280.8m). The recoverable amount for the
Projects CGU was $1,470m at the test date which was driven by the critical
assumptions described above and this led to an impairment charge of $815m in
the first half. The post tax discount rate would need to be 3.05% lower in
Projects to reduce the impairment charge to $nil. Reasonably possible
changes in future impairment tests could result in further impairment charges
as described below:
· A 1.5% increase in the post-tax discount rate would increase the
impairment charge to $981m
· A 1% reduction in the long-term growth rate would increase the
impairment charge to $871m
· A 1% reduction in the Projects CAGR would increase the impairment
charge to $841m.
The Group post-tax discount rate was 10.7% and, following the impairment noted
above, the recoverable amount was $3,938m which provided sufficient headroom
over goodwill and intangible assets. A 0.8% increase in the discount rate at
the Group level would result in a reduction of headroom to $nil. A 1.25%
reduction in the terminal growth rate would result in a reduction of headroom
to $nil.
11. Asbestos related litigation
$m
2024
At 1 January 2024 306.5
Reclassifications 4.1
Utilised (24.6)
Charge to income statement 4.4
Release of provisions (8.7)
Exchange movements (0.2)
At 30 June 2024 281.5
Presented as
Current -
Non-current 281.5
2023
At 1 January 2023 311.4
Reclassifications 10.5
Utilised (37.9)
Charge to income statement 17.5
Release of provisions (0.4)
Exchange movements 1.1
At 30 June 2023 302.2
Presented as
Current -
Non-current 302.2
The Group assumed the majority of its asbestos-related liabilities when it
acquired Amec Foster Wheeler in October 2017. Whilst some of the asbestos
claims have been and are expected to be made in the United Kingdom, the
overwhelming majority have been and are expected to be made in the United
States.
Some of Amec Foster Wheeler's US subsidiaries are defendants in numerous
asbestos-related lawsuits and out-of-court informal claims pending. Plaintiffs
claim damages for personal injury alleged to have arisen from exposure to, or
use of, asbestos in connection with work allegedly performed during the 1970s
and earlier. The estimates and averages presented have been calculated on the
basis of the historical US asbestos claims since the initiation of claims
filed against these entities.
The number and cost of current and future asbestos claims in the US could be
substantially higher than estimated and the timing of payment of claims could
be sooner than estimated, which could adversely affect the Group's financial
position, its results and its cash flows.
The Group expects these subsidiaries to be named as defendants in similar
suits and that new claims will be filed in the future. For purposes of these
financial statements, management have estimated the indemnity and defence
costs to be incurred in resolving pending and forecasted claims through to
2050. Although we believe that these estimates are reasonable, the actual
number of future claims brought against these subsidiaries and the cost of
resolving these claims could be higher.
Some of the factors that may result in the costs of asbestos claims being
higher than the current estimates include:
· an increase in the rate at which new claims are filed and an
increase in the number of new claimants;
· increases in legal fees or other defence costs associated with
asbestos claims; and
· increases in indemnity payments, decreases in the proportion of
claims dismissed with zero payment and payments being required to be made
sooner than expected
The Group has worked with its advisors with respect to projecting asbestos
liabilities and to estimate the amount of asbestos-related indemnity and
defence costs at each year-end through to 2050. Each year the Group records
its estimated asbestos liability at a level consistent with the advisors'
reasonable best estimate. The Group's advisors perform a quarterly and
annual review of asbestos indemnity payments, defence costs and claims
activity and compare them to the forecast prepared at the previous year-end.
Based on its review, they may recommend that the assumptions used to estimate
future asbestos liabilities are updated, as appropriate.
The total liability recorded in the Group's balance sheet at 30 June 2024 is
based on estimated indemnity and defence costs expected to be incurred to
2050. Management believe that any new claims filed after 2050 will be
minimal.
A net interest charge of $4.4m for the time value of money (June 2023: $5.5m)
and a yield curve credit of $8.2m (June 2023: charge $2.0m), which is driven
by the increase in rates used to discount its asbestos liabilities in the
first half of 2024, is included within exceptional items on the basis that
movements in the provision are non-trading and driven by market conditions out
with the Group's control. The Group has used a 27-year blended yield curve
rate (June 2023: 30-year US Treasury Bond rate), based on US Treasury strip
rates, to discount its asbestos liabilities. Asbestos related receivables
represents management's best estimate of insurance recoveries relating to
liabilities for pending and estimated future asbestos claims through to
2050. The receivables are only recognised when it is virtually certain that
the claim will be paid. The Group's asbestos-related assets have been
discounted at an appropriate rate of interest.
The net asbestos liability at 30 June 2024 amounted to $299.9m (December 2023:
$328.1m) and comprised $281.5m in provisions (December 2023: $306.5m) and
$46.2m in trade and other payables (December 2023: $50.4m) less $22.4m in long
term receivables (December 2023: $23.2m) and $5.4m in trade and other
receivables (December 2023: $5.6m).
12. Provisions
Litigation related provisions Total
Insurance Property Project related
provisions
2024 $m $m $m $m $m
At 1 January 2024 40.7 27.4 25.0 42.2 135.3
Reclassifications - - (0.4) (1.8) (2.2)
Utilised - (0.2) - (7.4) (7.6)
Charge to income statement 4.5 0.9 44.0 37.1 86.5
Released to income statement (6.5) (6.9) - (2.9) (16.3)
Exchange movements - (0.4) (0.3) (0.4) (1.1)
At 30 June 2024 38.7 20.8 68.3 66.8 194.6
Presented as
Current - 2.4 43.0 44.0 89.4
Non-current 38.7 18.4 25.3 22.8 105.2
Litigation related provisions Total
Insurance Property Project related
provisions
2023 $m $m $m $m $m
At 1 January 2023 46.2 26.0 12.8 63.3 148.3
Reclassifications 1.2 (0.2) (0.2) (1.7) (0.9)
Utilised - (0.3) (10.9) (10.4) (21.6)
Charge to income statement 6.5 0.8 0.2 13.7 21.2
Released to income statement (10.9) (0.1) - (7.8) (18.8)
Exchange movements - 0.5 0.3 0.2 1.0
At 30 June 2023 43.0 26.7 2.2 57.3 129.2
Presented as
Current - 2.4 0.2 33.6 36.2
Non-current 43.0 24.3 2.0 23.7 93.0
Insurance provisions
The Group has liabilities in relation to its captive insurance companies of
$38.7m (December 2023: $40.7m).
The Group currently has one captive insurance company, Garlan Insurance
Limited, which is active and is registered in Guernsey with tax domicile in
the UK. The company provides insurance solely to other Group companies and
does not provide any insurance to third parties. The provisions recorded
represent amounts payable to external parties in respect of claims, the value
of which is based on actuarial reports which assess the likelihood and value
of these claims. These are reassessed annually, with movements in claim
reserves being recorded in the income statement.
Property provisions
Property provisions total $20.8m (December 2023: $27.4m). Property provisions
mainly comprise of dilapidations relating to the cost of restoring leased
property back into its original, pre-let condition. The estimate of costs is
the greatest area of uncertainty and the timing of future cash outflows is
linked to the term dates of numerous individual leases.
Litigation related provisions
The Group is party to litigation involving clients and sub-contractors arising
from its contracting activities. Management has taken internal and external
legal advice in considering known or reasonably likely legal claims and
actions by and against the Group. Where a known or likely claim or action is
identified, management carefully assesses the likelihood of success of the
claim or action. A provision is recognised only in respect of those claims
or actions where management consider it is probable that a cash outflow will
be required.
Provision is made for management's best estimate of the likely settlement
costs and/or damages to be awarded for those claims and actions that
management considers are likely to be successful. Due to the inherent
commercial, legal and technical uncertainties in estimating project claims,
the amounts ultimately paid or realised by the Group could differ from the
amounts that are recognised in the financial statements.
The charge of $44.0m recognised in the first half of 2024 includes additional
provisions made in respect of claims made against the Group.
Project related provisions
The Group has numerous provisions relating to the projects it undertakes for
its customers. The value of these provisions relies on specific judgements in
areas such as the estimate of future costs or the outcome of disputes and
litigation. Whether or not each of these provisions will be required, the
exact amount that will require to be paid and the timing of any payment will
depend on the actual outcomes. The balance is made up of a large number of
provisions, which are not individually material or significant.
Certain of the jurisdictions in which the Group operates, in particular the US
and the EU, have environmental laws under which current and past owners or
operators of property may be jointly and severally liable for the costs of
removal or remediation of toxic or hazardous substances on or under their
property, regardless of whether such materials were released in violation of
law and whether the operator or owner knew of, or was responsible for, the
presence of such substances. Largely as a consequence of the acquisition of
Amec Foster Wheeler, the Group currently owns and operates, or owned and
operated, industrial facilities. It is likely that, as a result of the Group's
current or former operations, hazardous substances have affected the property
on which those facilities are or were situated.
The charge of $37.1m recognised in the first half of 2024 includes provisions
made in respect of LSTK and large-scale EPC contracts as described in note 4.
As described in note 19, the Group agreed to indemnify certain third parties
relating to businesses and/or assets that were previously owned by the Group
and were sold to them. These principally relate to businesses that were sold
by Amec Foster Wheeler prior to its acquisition by the Group.
13. Disposal Group held for sale
As at 30 June 2024, the Group had a sales process ongoing in relation to its
investment in the EthosEnergy joint venture. The investment balance of
$72.0m, representing the Group's 51% shareholding, has been classified as held
for sale in the Group's Balance Sheet as at 30 June 2024.
14. Related party transactions
The following transactions were carried out with the Group's joint ventures in
the six months to 30 June. These transactions comprise sales and purchase of
goods and services in the ordinary course of business. The receivables include
loans to certain joint venture companies.
Unaudited Unaudited Audited
Interim
Interim
Full Year
June 2024 June 2023
December 2023
$m $m $m
Sales of goods and services to joint ventures 0.3 0.4 3.6
Purchase of goods and services from joint ventures 0.2 1.8 0.6
Receivables from joint ventures 11.1 7.6 9.8
Payables to joint ventures 0.8 0.1 12.1
The Group operates a number of defined benefit pension arrangements and seeks
to fund these arrangements to ensure that all benefits can be paid as and when
they fall due. The US plans are funded to ensure that statutory obligations
are met and contributions are generally payable to at least minimum funding
requirements. Note 8 sets out details of the Group's pension obligations under
these arrangements.
15. Analysis of net debt
At 1 January 2024 Cash Other Exchange movements Unaudited
$m flow $m $m at 30 June
$m 2024
$m
Short term borrowings (315.3) 28.0 (0.4) (9.4) (297.1)
Long term borrowings (812.2) (235.5) (1.2) (2.5) (1,051.4)
(1,127.5) (207.5) (1.6) (11.9) (1,348.5)
Cash and cash equivalents 434.0 41.2 - (2.8) 472.4
Net debt before leases (693.5) (166.3) (1.6) (14.7) (876.1)
Leases (400.8) 55.0 (46.9) 4.7 (388.0)
Net debt including leases (1,094.3) (111.3) (48.5) (10.0) (1,264.1)
At 1 January 2023 Cash Other Exchange movements Unaudited
$m flow $m $m at 30 June
$m 2023
$m
Short term borrowings (345.9) 105.5 2.1 (22.9) (261.2)
Long term borrowings (584.0) (257.0) (1.9) (0.3) (843.2)
(929.9) (151.5) 0.2 (23.2) (1,104.4)
Cash and cash equivalents 536.7 (87.8) - 1.3 450.2
Net debt before leases (393.2) (239.3) 0.2 (21.9) (654.2)
Leases (342.9) 52.4 (27.7) (7.5) (325.7)
Net debt including leases (736.1) (186.9) (27.5) (29.4) (979.9)
Cash at bank and in hand at 30 June 2024 includes $150.8m (December 2023:
$127.7m) that is part of the Group's cash pooling arrangements. For internal
reporting and the calculation of interest, this amount is netted with
short-term overdrafts and is presented as a net figure on the Group's balance
sheet. In preparing these financial statements, the Group is required to gross
up both its cash and short-term borrowings figures by this amount.
Cash and cash equivalents of $472.4m (June 2023: $450.2m and December 2023:
$434.0m) includes restricted cash of $45.1m (June 2023: $11.5m and December
2023: $49.4m). The restricted cash balance comprises $41.0m (June 2023: not
considered restricted and December 2023: $38.1m) of cash held in Equatorial
Guinea where the Group are seeking Central Bank approval in order to
repatriate cash from a subsidiary via dividends or intercompany loans. A
further $2.4m (June and December 2023: $9.3m) of cash is held in jurisdictions
where there is insufficient liquidity in the local market to allow for
immediate repatriation. The remaining $1.7m (June 2023: $2.3m and December
2023: $2.0m) relates to balances held within Russia that are impacted by the
sanctions associated with Russia's invasion of Ukraine. Management considers
it appropriate to include the restricted cash balance in the Group's net debt
figure on the basis that it meets the definition of cash, albeit is not
readily available to the Group.
The lease liability at 30 June 2024 is made up of long term leases of $312.0m
(June 2023: $234.9m) and short term leases of $76.0m (June 2023: $90.8m).
The other movement of $48.5m (June 2023: $27.5m) in the above table represents
new leases entered into of $37.2m (June 2023: $23.1m) and disposals of $0.5m
(June 2023: $3.9m) during the first half, interest expense of $10.2m (June
2023: $8.5m), amortisation of bank facility fees of $1.2m (June 2023: $1.9m)
and an increase in accrued interest on short-term borrowings of $0.4m (June
2023: $2.1m reduction).
As at 30 June 2024, the Group had received $197.2m (December 2023: $198.2m) of
cash relating to non-recourse financing arrangements. An equivalent amount of
trade receivables was derecognised on receipt of the cash. At 30 June 2024,
$81.1m (December 2023: $111.7m) had been received from customers in the normal
course of business in relation to the same amounts received from the factors.
This $81.1m (December 2023: $111.7m) is due to be paid over to the factors and
is included in trade payables. The impact of both the cash received from the
facility and the cash received from customers is included within cash
generated from operations.
16. Share based payment arrangements
Share based charges for the period of $8.8m (June 2023: $9.8m) relate to
options granted under the Group's executive share option schemes and awards
under the Long-Term Plan. The charge is included in administrative expenses in
the income statement.
17. Financial risk management and financial instruments
Financial risk factors
The Group's activities give rise to a variety of financial risks: market risk
(including foreign exchange and cash flow interest rate risk), credit risk and
liquidity risk. The condensed interim financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements and should be read in conjunction with the Group's 2023
Annual Report and Accounts.
There have been no material changes in the risk management function or in any
risk management policies since 31 December 2023.
Fair value of non-derivative financial assets and financial liabilities
The fair value of short-term borrowings, trade and other payables, trade and
other receivables, short-term deposits and cash at bank and in hand
approximates to the carrying amount because of the short maturity of interest
rates in respect of these instruments.
Derivative financial assets and liabilities
The Group enters into forward contracts to hedge foreign exchange exposures
arising in the normal course of business. The Group also hedges against
changes in interest rates by entering into interest rate swaps. The fair
values of these derivative financial instruments are included in financial
assets and trade and other payables in the Group balance sheet. The fair
values at 30 June 2024 are not significant.
18. Capital commitments
At 30 June 2024, the Group has entered into contracts for future capital
expenditure amounting to $105.2m relating to property plant and equipment and
intangible assets. These capital commitments mainly relate to various existing
software packages which are subsequently amortised over their useful lives.
These capital commitments have not been provided for in the financial
statements.
19. Contingent liabilities
General
A contingent liability is a potentially material present obligation that
arises from past events but is not recognised because it is not probable that
an outflow of resources will be required to settle the obligation or the
amount of the obligation cannot be measured with sufficient reliability.
Cross guarantees
At the balance sheet date, the Group had cross guarantees extended to its
principal bankers and surety providers in respect of sums advanced to
subsidiaries and certain joint ventures. A liability will only occur in the
event of a default by a subsidiary or certain joint ventures on its
obligations.
Legal Claims
From time to time, the Group is notified of claims in respect of work carried
out on customer projects or as a subcontractor to others. For a number of
these claims the potential exposure is material. Where management believes
we are in a strong position to defend these claims no provision is made, such
that no economic outflow is probable. This includes a civil administrative
determination, made by the Contraloría General de la República de Colombia
against two Amec Foster Wheeler subsidiaries, along with 22 others, in
relation to work carried out for Refineria de Cartagena, S.A ("Reficar")
between 2009 and 2016. We are continuing to vigorously challenge this
determination and we are confident in our ability to prevail. This also
includes commercial disputes which arise predominantly within our Projects
business, some of which may evolve within the next 12 months and these will be
reassessed in future periods as the Group engages in defences to the claims.
At any point in time there are a number of claims where it is too early to
assess the merit of the claim, and hence it is not possible to make a reliable
estimate of the potential financial impact. In performing this assessment, the
directors considered the nature of existing litigations or claims, the
progress of matters, existing law and precedent, the opinions and views of
legal counsel and other advisors, the Group's experience in similar cases
(where applicable) and other facts available to the Group at the time of
assessment. The director's assessment of these factors may change over time as
individual litigations or claims progress.
The group carries insurance coverage and in the event of future economic
outflow arising with respect to any of these contingencies, an element of
reimbursement may occur, subject to any excess or other policy restrictions
and limits.
Investigations
Following the settlement of the various regulatory investigations in 2021, it
remains possible that there may be other adverse consequences for the Group's
business including actions by authorities in other jurisdictions. At this
time, these consequences appear unlikely and therefore no provision has made
in respect of them in the financial statements.
Employment claims
The Group received assessments from HMRC into the historical application of
employer's National Insurance Contributions to workers on the UK Continental
Shelf. The assessments have been appealed and our case is stayed for a fixed
period. We believe it is more likely than not that we will be able to defend
this challenge and therefore as a result do not expect that it is probable a
liability will arise. The maximum potential exposure to the Group in relation
to tax and interest should we be unsuccessful in our position is approximately
$33.1m.
Indemnities and retained obligations
The Group has agreed to indemnify certain third parties relating to businesses
and/or assets that were previously owned by the Group and were sold to them.
Such indemnifications relate primarily to breach of covenants, breach of
representations and warranties, as well as potential exposure for retained
liabilities, environmental matters and third party claims for activities
conducted by the Group prior to the sale of such businesses and/or assets. We
have established provisions for those indemnities in respect of which we
consider it probable that there will be a successful claim, to the extent such
claim is quantifiable. The Group sold its Built Environment Consulting
business to WSP in late 2022 and the share purchase agreement provided an
indemnity for losses on three specified contracts. No provisions were
considered necessary for these contracts as at 30 June 2024.
Tax planning
HMRC have challenged the deductibility of certain interest expenses in
relation to loans from Irish resident finance companies to the UK. The tax
treatment of the Irish finance companies under the UK controlled foreign
company regime was previously considered as part of the EU State Aid
challenge, but no state aid was found to apply. A significant amount of
contemporaneous documentation has been provided to HMRC regarding the
transition from a previous finance company structure in the Netherlands, and
subsequent funding of acquisitions via the Irish companies. HMRC continue with
their enquiries. We believe that the interest deductions have been
appropriately taken in line with tax legislation and guidance and therefore do
not expect any outflow as a result, however we continue to monitor case law in
the area and will consider the challenges of HMRC when raised. The maximum
potential exposure to the Group including interest in relation to the interest
deductions is approximately $39.7m and in the event of any amount ultimately
being payable there is no prospect of any reimbursement.
20. Post balance sheet events
The directors have reviewed the position of the Group, up to the date
authorised for issue of these financial statements and have not identified any
events arising after the reporting period which require disclosure.
Statement of directors' responsibilities
for the six month period to 30 June 2024
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted for use in the
UK;
· the interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R
(https://alex.kpmg.com/AROWeb/document/lfc/find/UK_XLNUK_FSA_DR_DTR_BODY_para4_2_7R)
of the Disclosure Guidance and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
b) DTR 4.2.8R
(https://alex.kpmg.com/AROWeb/document/lfc/find/UK_XLNUK_FSA_DR_DTR_BODY_para4_2_8R)
of the Disclosure Guidance and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The directors of John Wood Group PLC are listed in the Group's 2023 Annual
Report and Accounts.
K Gilmartin
Chief Executive
A Balan
Chief Financial Officer
19 August 2024
Shareholder information
Officers and advisers
Secretary and Registered Office Registrars
M Rasmuson Equiniti
John Wood Group PLC Aspect House
Sir Ian Wood House Spencer Road
Hareness Road Lancing
Altens Industrial Estate West Sussex
Aberdeen BN99 6DA
AB12 3LE
Tel: 01224 851000 Tel: 0371 384 2649
Stockbrokers
JPMorgan Cazenove Limited
Morgan Stanley
Company solicitors
Slaughter and May
The Group's Investor Relations website can be accessed at www.woodplc.com.
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