The parlous state of UK oil services was laid bare by news that John Wood Group (WG.) has cut back its workforce by 13 per cent since the end of last year. The engineering group, which is one of the most prominent contractors in the North Sea, also revealed an 11 per cent fall in gross profits to $431m (£276m). Yet this was better than we had been expecting, and shows how swift action on the cost front has helped mitigate the effects of reduced activity and increased pricing pressure.
Many of the job losses were from its UK operations. Bad news for oil workers, but the redundancies have contributed to a reduction of around $40m in overheads, which was "significantly ahead of initial estimates". The reduction in the unconventional rig count in the US shale industry meant that revenues from the group's production services division fell by more than a fifth from the 2014 half-year. The revenue fall-away in John Wood's Engineering business was modest by comparison, underlining the benefits of a well-diversified product offering. The most impressive point, however, was that the group managed to increase the trading margin across both divisions.
Separately, John Wood announced that it had received a letter of award for a new five-year "multimillion" dollar contract with Shell to provide services to four onshore oilfields in Gabon.
Prior to these figures, JPMorgan Cazenove estimated adjusted EPS of 76¢ for the full year, against 97¢ in 2014.
| JOHN WOOD (WG.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 574p | MARKET VALUE: | £2.2bn | |
| TOUCH: | 573-575p | 12-MONTH HIGH: | 806p | LOW: 519p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 684¢* | NET DEBT: | 11% | |
| Half-year to 30 June | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 3.2 | 233 | 38.5 | 8.9 |
| 2015 | 2.7 | 161 | 31.7 | 9.8 |
| % change | -18 | -31 | -18 | +10 |
Ex-div: 27 Aug Payment: 24 Sep £1 = $1.56. *Includes intangible assets of $1.92bn, or 510¢ a share. | ||||
