John Wood Group (WG.) is one of the steadiest oil services companies around, but even it is not immune to the underlying problems affecting the sector. Its share price plummeted 8 per cent after the company said its engineering division would grow less than expected this year and guided towards "challenges to growth in 2014".
Meanwhile, peer Saipem (0NWY) has issued two profit warnings in 2013, Subsea 7 (0OGK) has had contract problems in Brazil and oil rig maker Lamprell (LAM) issued five profit warnings in 2012. Earnings visibility in the oil services sector is declining and a few clients have been deferring projects.
Yet John Wood's strong results show the company remains in very solid shape. Revenues and earnings climbed markedly year on year, while the trading margin increased by 100 basis points to 7.1 per cent. True, growth in the first half was slightly slower than that seen in the second half of 2012. But the engineering division only accounts for 29 per cent of group turnover and revenue growth there for 2013 has only been downgraded to "between 10 and 15 per cent" from 15 per cent. Management said a weakening oil sands market in Canada was to blame.
Broker JPMorgan Cazenove lowered its forecasts slightly post results to EPS of 90.4¢ in 2013 and 93.6¢ for 2014 (from 71.4¢ in 2012).
JOHN WOOD (WG.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 820p | MARKET VALUE: | £3.1bn | |
| TOUCH: | 819-820p | 12-MONTH HIGH: | 927p | LOW: 709p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 606¢* | NET DEBT: | 9.6% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 3.35 | 151 | 33.9 | 5.70 |
| 2013 | 3.45 | 204 | 43.5 | 7.10 |
| % change | +3 | +35 | +28 | +25 |
Ex-div: 28 Aug Payment: 26 Sep £1=$1.56 *Includes intangible assets of $1.8bn, or 471¢ a share | ||||
