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Shares in oil and gas engineer Wood Group ticked up on results that were in line with expectations, reflecting a very lucrative 2008 as the company reiterated its defensive strengths in the face of a sectoral slowdown. Chairman Ian Wood admits that the 2009 figures will be hit by a decline in well support business for onshore US drilling activity, accounting for roughly 6 per cent of 2008 revenues, and a slowdown in new project engineering in the UK North Sea. But revenues across other businesses should remain robust.
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Mr Wood says that the top five international oil majors employing Wood Group in its upstream engineering capacity will actually increase capex (as a group) by some 2 per cent in 2009, as they remain committed to large, complex projects despite current hydrocarbon price weakness, which they see as temporary. Meanwhile the production facilities business, the largest single contributor to group revenues, is premised on ongoing operations and maintenance spend as opposed to new project development. So it should also be well-insulated from the capex pull-back by mid- and low-tier companies, even in the North Sea.
The gas turbine division, which diversifies the group into power sector engineering, posted flat revenues last year but, servicing either already-operational oil and gas facilities or public utility requirements worldwide, this business should also hold up well. A dividend increase reflects management's own confidence in prospects.
Evolution Securities anticipates full-year 2009 adjusted EPS of 45.5¢ (32.5p).
| Wood Group (WG.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 188p | MARKET VALUE: | £992m | |
| TOUCH: | 188-189p | 12-MONTH HIGH: | 504p | LOW: 152p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 215¢ * | NET DEBT: | 22% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2004 | 2.29 | 66 | 8.0 | 3.6 |
| 2005 | 2.76 | 125 | 17.0 | 4.0 |
| 2006 | 3.47 | 184 | 24.4 | 5.0 |
| 2007 | 4.43 | 260 | 33.0 | 7.0 |
| 2008 | 5.24 | 384 | 49.6 | 9.0 |
| % change | +18 | +48 | +50 | +29 |
Ex-div: 15 Apr Payment: 18 May *Includes intangible assets of $632m, or 120¢ a share £1=$1.40 |
||||
Wood Group is one of the more robust oil services players and boasts decent long-term prospects. Trading on a forward PE ratio of six and rated modestly above book value, the shares have solid long-term attractions at this level. Good value.
Last IC View: Good value, 428p, 26 Aug 2008
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-IC-2.1.3g-prod - 17/03/2010 18:13:09 - ben.wheeler
